The Owners - Strata Plan No 74602 v Brookfield Australia Investments Ltd

[2015] NSWSC 1916

Supreme Court

New South Wales

• Summary available

Medium Neutral Citation:	The Owners – Strata Plan No 74602 v Brookfield Australia Investments Ltd [2015] NSWSC 1916
Hearing dates:	3-6, 10-13, 17-20, 24-27 August and 16-17 September 2015; further submissions received 9, 20 and 26 October 2015; motion to re-open 9 November 2015
Decision date:	16 December 2015
Jurisdiction:	Equity - Technology and Construction List
Before:	Stevenson J
Decision:	Parties to confer and agree on the orders necessary to give effect to these reasons, and the further steps necessary to resolve any outstanding issues
Catchwords:	BUILDING AND CONSTRUCTION – design and construct contract between developer and first defendant – plaintiff successor in title to developer – whether first defendant breached statutory warranties under s 18B(a), (b) and (f) of the Home Building Act 1989, as incorporated into the contract – whether facade was designed and constructed in accordance with the “Hyder Specification” as incorporated in the contract – proper construction of the Hyder Specification – whether a reasonable businessperson would construe the Hyder Specification as if the contractor had warranted that the facade would be fully weather tight when tested in accordance with AS 4284 for the building’s entire design life – the extent to which the building has been shown not to be weather tight – whether observational evidence of two lay witnesses demonstrates water ingress in window assemblies beyond those recognised by expert witnesses in joint report – whether first defendant’s failure to conduct prototype testing has any relevant consequence – whether prototype testing conducted on indistinguishable window assemblies at a different site indicates that the building would have passed prototype tests – whether plaintiff’s expert witness’s tests were appropriate to reveal any inadequacy in the design of the facade – whether the first defendant’s proposed remedial work to the facade is necessary and reasonable to compensate the plaintiff – whether replacement of the whole facade is out of all proportion to the benefit that would be obtained – whether plaintiff has established claims in respect to defects associated with mechanical services, bathrooms and ensuites, fire services and general internal defects; BUILDING AND CONSTRUCTION – design and construct sub-contract between first and fourth defendants – whether the developer was a “non-contracting owner” vis-à-vis the sub-contract for the purposes of s 18D(1A) of the Home Building Act– whether plaintiff as successor in title to developer entitled to enforce s 18B statutory warranties against the fourth defendant sub-contractor – whether, in any event, the plaintiff’s claim against the fourth defendant is statute barred – the relevant date of completion of the sub-contract under s 3B of the Home Building Act – whether the limitation period applicable to the s 18B warranties has expired; TORTS – strata titles – whether the first and third defendants owed a duty of care to the plaintiff –whether the plaintiff is relevantly vulnerable – whether case can be distinguished from Brookfield Multiplex Limited v Owners – Strata Plan No 61288 [2014] HCA 36 – whether the fact that the plaintiff has the benefit of statutory warranties under the Home Building Act against the first defendant is a reason to deny the existence of a duty of care
Legislation Cited:	Building and Construction Industry Security of Payment Act 1999 (NSW) Domestic Building Contracts Act 1995 (Vic) Environmental Planning and Assessment Act 1979 (NSW) Environmental Planning and Assessment Regulation 2000 (NSW) Home Building Act 1989 (NSW) Home Building Amendment (Warranties and Insurance) Act 2010 (NSW)
Cases Cited:	Ace Woollahra Pty Ltd v The Owners – Strata Plan No 61424 [2010] NSWCA 101; 77 NSWLR 613 Bellgrove v Eldridge [1954] HCA 36; 90 CLR 613 Brewarrina Shire Council v Beckhaus Civil Pty Ltd [2006] NSWCA 361 Brookfield Multiplex Ltd v Owners – Strata Plan No 61288 [2014] HCA 36 Building Insurers’ Guarantee Corporation v The Owners – Strata Plan No 57504 [2010] NSWCA 23 Chan v Acres [2015] NSWSC 1885 Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; 251 CLR 640 Esanda Finance Corporation Ltd v Peat Marwick Hungerfords (1997) 188 CLR 241 Hill v Van Erp (1997) 188 CLR 159 Larking v Great Western (Nepean) Gravel Limited (in liq) [1940] HCA 37; 64 CLR 221 Moorabool Shire Council v Taitapanui [2006] VSCA 30. Mount Bruce Mining Pty Limited v Wright Prospecting Pty Limited [2015] HCA 37 Owners Corporation Strata Plan 61288 v Brookfield Multiplex [2012] NSWSC 1219 Owners Corporation Strata Plan 72535 v Brookfield Multiplex Ltd [2012] NSWSC 712 Perre v Apand Pty Ltd (1999) 198 CLR 180 Radford v De Froberville [1977] 1 WLR 1262 Robinson v Harman (1848) 1 Exch 850; 154 ER 363 South Parklands Hockey & Tennis Centre Inc v Brown Falconer Group Pty Ltd [2004] SASC 81 Tabcorp Holdings Ltd v Bowen Investments Pty Ltd [2009] HCA 8; 236 CLR 272 The Owners – Strata Plan No 74602 v Brookfield Australia Investments Ltd [2015] NSWSC 1682 The Owners – Strata Plan No 64757 v MJA Group Pty Ltd [2011] NSWCA 236; 81 NSWLR 426 The Owners Corporation – SP 69567 v Landson Alliance Australia Pty Limited [2014] NSWSC 1592 Vero Insurance Ltd v Kassem [2011] NSWCA 381 The Owners – Strata Plan No 74602 v Brookfield Australia Investments Ltd [2015] NSWSC 1144 Wheeler v Ecroplot Pty Ltd [2010] NSWCA 61 Woolcock Street Investments Pty Ltd v CDG Pty Ltd [2004] HCA 16; 216 CLR 515
Category:	Principal judgment
Parties:	The Owners – Strata Plan No 74602 (Plaintiff) Brookfield Australia Investments Limited (First Defendant) Brookfield Multiplex Constructions Pty Limited (Second Defendant) Multiplex Corporate Agency Pty Ltd (Third Defendant) G James Glass & Aluminium Pty Ltd (Fourth Defendant) Norska Group Pty Limited (Fifth Defendant) Hastie Australia Pty Limited (Sixth Defendant) Ricdav Pty Limited (Seventh Defendant) MDS Tiling Pty Limited (Eighth Defendant) Stainless Services Group Pty Ltd (Ninth Defendant) Andec Fire Systems (Australia) Pty Limited (Tenth Defendant) Wright Pools Pty Ltd (Eleventh Defendant) Eastmark Holdings Pty Limited (Twelfth Defendant) Parklane Building Corporation Pty Limited (Thirteenth Defendant)
Representation:	Counsel: F Corsaro SC with A Thomas (and O Fagir on 3, 10-13 and 18-19 August 2015) (Plaintiff) M Ashhurst SC with F P Hicks (First, Second and Third Defendants) D T Miller SC (and M Dempsey SC on 3 and 5 August 2015) with C Purdy (Fourth Defendant) Solicitors: Colin Biggers & Paisley (Plaintiff) Norton Rose Fulbright (First, Second and Third Defendants) Moray & Agnew (Fourth Defendant)
File Number(s):	SC 2012/76192

table of contents

Introduction	1
The appearances – the hearing – a preliminary judgment	21
The Contract	26
Measure of damages	35
The Sub-Contract	41
The Owners Corporation’s claim against James under s 18D(1A) of the HBA	46
Is the claim maintainable?	46
“An alternate road to James”	67
Conclusion	69
Is the claim out of time?	70
Duty of care	98
The Hyder Specification	139
The provisions of the Hyder Specification	145
Relevant standards	156
AS 4284	157
AAMA 501.2	167
AAMA 511.08	174
Proper construction of the Hyder Specification	180
To what extent has the building been shown not to be weather tight?	209
The agreement of the experts – Exhibit K	209
Contemporaneous evidence of water ingress	234
The observations evidence of Mr Gwodz and Mr Moisidis	243
No prototype testing	274
The testing by Mr Lalas	284
The significance of Dr Graeme Wood’s report	325
The repairs effected by Mr Womack	331
What has the Owners Corporation established?	365
Mechanical services	372
Access	376
Heating	383
Water meters	392
Bathrooms and ensuites	401
Water stop angles	408
Rust in door jambs	427
Damage to concealed spaces – vanities	436
Damage to adjoining rooms	452
Grout discolouration	455
Fire services	462
Partially disputed items	469
Wholly disputed items	479
Location of hydrant relay pump room on level 17 (item 6)	479
Ventilation of pump and sprinkler valves rooms (items 7 and 23)	485
Level 37 pump room exits (item 9)	493
Balustrades (item 18)	498
No sprinkler in lift room (item 20)	503
Mimic/call panel (items 27 and 28)	510
General internal defects	516
The “urgent works”	524
Conclusion	528

Judgment

Introduction

1. These proceedings concern a residential development known as “Beau Monde” in North Sydney. In that building, the 9th to 36th levels comprise 241 strata apartments.

2. The plaintiff is the relevant owners corporation and the registered proprietor of the common property. I shall refer to it as “the Owners Corporation”.

3. The Owners Corporation came into existence on 6 April 2005 upon registration of the relevant strata plan.

4. There are two active defendants to the proceedings; the first defendant (“Brookfield”) and the fourth defendant (“James”).

5. Brookfield built the property pursuant to a design and construct contract dated 25 October 2002 (“the Contract”) made between it and the developer, Eastmark Holdings Pty Ltd. Eastmark is in receivership and subject to a deed of company arrangement. It is a defendant, but played no role in the proceedings before me.

6. James is the sub-contractor of Brookfield that designed and constructed certain elements of the facade of the building, pursuant to a sub-contract agreement (“the Sub-Contract”) dated 23 September 2003.

7. The works achieved practical completion in accordance with the Contract on or about 21 March 2005, on which date an interim occupation certificate was issued. Further substantial works were subsequently undertaken to levels 35 and 36 by the owners of those lots (and not by Brookfield). A final occupation certificate for those works was issued on or about 4 December 2006.

8. These proceedings were commenced on 8 March 2012. The Owners Corporation claims damages from Brookfield for breach of contract, and from both Brookfield and James arising from alleged breaches of the statutory warranties in s 18B of the Home Building Act 1989 (NSW) (“the HBA”) and at common law.

9. The claims generally concern:

1. water ingress, window assemblies and the facade;

2. mechanical services;

3. bathrooms and ensuites;

4. fire services; and

5. general internal defects.

10. In monetary terms, the most significant of those claims is that concerning water ingress through the window assemblies which comprise the facade. The Owners Corporation claims that the whole facade must be replaced at a cost of some $14.8 million.

11. The Owners Corporation’s claims against Brookfield arise under both the Contract and the statutory warranties in s 18B of the HBA, relying on s 18D(1) of the HBA as a “successor in title” to the developer, Eastmark. Brookfield does not dispute its liability to the Owners Corporation as successor in title to Eastmark, to the extent that the Owners Corporation can establish a breach by Brookfield of the s 18B statutory warranties.

12. Brookfield accepts that the Owners Corporation has established some such breaches, and is entitled to damages in the order of $720,000. That sum includes some $89,000 to replace 31 window glazing assemblies (which it accepts have been shown to leak) and some $320,000 in respect of urgent works done in 2012 (including repairs to leaking windows).

13. There is no dispute that, at the relevant time, the warranty under s 18B(a) (as it was at the date of the Contract) of the HBA obliged Brookfield to perform the work in a proper and workmanlike manner. It also obliged Brookfield to construct the works “in accordance with the plans and specifications set out in the contract”. One of those “specifications” was that the facade be designed and constructed in accordance with a “Facade Specification” prepared by Hyder Consulting (Australia) Pty Ltd (“the Hyder Specification”). The nature of Brookfield’s obligations under the Hyder Specification is a major, if not the major, issue in the proceedings. It involves the proper construction of that document. I deal with it below.

14. There was a warranty under s 18B(b) (as it then was) of the HBA that materials supplied will be “good and suitable” for the purpose for which they are used. The Owners Corporation contends that the effect of this warranty was that the elements of the facade supplied had to create a facade that was weather tight. Brookfield does not dispute this.

15. There was also a warranty under s 18B(f) (as it then was) that the work and materials used in doing the work must be reasonably fit for purpose. So far as concerns the facade, the Owners Corporation’s case is that the effect of this warranty was that the facade had to be built so that it would not leak.

16. The Owners Corporation also alleges that Brookfield owed it a common law duty to carry out the design and construction of the building and/or supervise, coordinate or manage the design and construction of the building such that the building, when complete, would:

1. have been designed and constructed in a proper and workmanlike manner;

2. have been designed and constructed with reasonable care;

3. comply with all relevant legislative requirements;

4. comply with the warranties under the HBA;

5. comply with the Building Code of Australia;

6. comply with the Development Consent;

7. be free of defects and faults in its design and construction;

8. be fit for the Owners Corporation’s purposes; and

9. comply with the applicable Australian Standards.

17. Brookfield contends that, by reason of the decision of the High Court in Brookfield Multiplex Ltd v Owners – Strata Plan No 61288 [2014] HCA 36 (which I shall refer to in these reasons as “Brookfield”), no such duty of care arises.

18. The Owners Corporation’s claim against James relates only to the facade issue. The claim is made under s 18D(1A) of the HBA and at common law. The Owners Corporation contends that James owed it a duty of care in the same terms as that alleged against Brookfield.

19. As to the claim under the HBA, James contends that it is not maintainable under s 18D(1A), and that, in any event, any such claim is brought out of time and is statute barred. James also contends that by reason of the High Court decision in Brookfield, it owed no duty of care to the Owners Corporation.

20. Brookfield brought a cross-claim against James. The cross-claim received little attention during the hearing. I understood it to have led to agreements between Brookfield and James, to which I refer below (at [225]), concerning the sharing of certain repair costs.

The appearances – the hearing – a preliminary judgment

21. Mr Corsaro SC appeared with Mr Thomas for the Owners Corporation. Mr Ashhurst SC appeared with Mr Hicks for Brookfield. Mr Miller SC appeared with Mr Purdy for James.

22. The hearing occupied 18 days, including four days for opening and closing submissions and one day for an inspection of the property (on 5 August 2015). The remaining dates were spent on evidence, the vast bulk of which was concurrent expert evidence.

23. Both before and after final oral submissions (heard on 16 and 17 September 2015), I received very detailed written submissions from the parties. Those submissions included detailed schedules, often of a highly technical nature, summarising the parties’ competing contentions and references to the evidence. I have been greatly assisted by those submissions. Much of what follows, especially as to uncontroversial background matters, is drawn, with gratitude, from them.

24. In light of the large number of issues ventilated in the proceedings, many of which are of a highly technical nature, I proposed to counsel that I publish a preliminary judgment dealing with the major matters in contention, especially as to matters of principle. This is in the hope (indeed expectation) that the remaining issues can be narrowed, resolved or referred out for final determination. During final oral submissions, I circulated a note setting out issues which could appropriately be dealt with in such a preliminary judgment. Counsel were content that I deal with those issues in these reasons (without necessarily committing themselves to the course that should be followed once the preliminary judgment is published).

25. One matter that has been thereby deferred is the Owners Corporation’s claims against the defendants other than Brookfield and James (which claims received almost no attention during the hearing before me).

The Contract

26. The Contract comprised a “Formal Instrument of Agreement” together with “Amended General Conditions of Contract for Design and Construct” based on AS4300-1995.

27. The operative provisions of the Formal Instrument of Agreement were included cll 1 and 2, which provided:

“1 [Brookfield’s] fundamental obligations

[Brookfield] must design, construct and complete the Works in accordance with the Contract.

2 [Eastmark’s] fundamental obligations

[Eastmark] will pay [Brookfield] the contract sum of $81,500,000…exclusive of GST for the due and proper performance of the Works in accordance with the Contract.”

28. The detail of the parties’ obligations was set forth in the Amended General Conditions of Contract for Design and Construct.

29. Clause 3.1(a) of that document provided that Brookfield:

“…must design, construct and complete the work under the Contract in accordance with the requirements of the Contract”.

30. Clause 4.1 provided:

“4.    WARRANTIES

4.1   [Brookfield’s] Warranties

Without limiting the generality of Clause 3.1, [Brookfield] warrants to [Eastmark] that [Brookfield]:

(a)   at all times will be suitably qualified and experienced, and without limiting [Brookfield’s] other warranties, will exercise the due skill, care and diligence in the execution and completion of:

(i)   [Brookfield’s] Design Obligations to be expected of a professional, qualified and competent professional designer skilled and experienced in the design of works of a similar size, scope and complexity to the Works; and

(ii)   the remainder of the work under the Contract to be expected of a professional, qualified and competent Contractor skilled and experienced in the carrying out of works of a similar size, scope and complexity to the Works;

…

(d)   will execute and complete [Brookfield’s] Design Obligations and produce the Design Documents to accord with [Eastmark’s] Project Requirements and, if Clause 10 applies, accept the novation and retain the Consultants for any work the subject of a prior contract with [Eastmark];

…

(f)    will design, construct and complete the work under the Contract so that the Works, when completed, will:

(i)   be fit for their stated purpose;

…

(iii)   have areas for each apartment which will not:

(A)   result in [Eastmark] being in breach of any of its obligations under any sales contract relating to the Works;

(B)   result in any purchaser under any such sales contract being entitled to terminate or rescind a sales contract;

...

Without limiting the generality of Clause 3.1 or other parts of this Clause 4.1, [Brookfield] warrants to [Eastmark] the matters set out in section 18B of the Home Building Act 1989 (NSW).”

31. The Contract thus, in terms, incorporated the statutory warranties in s 18B of the HBA, relevantly that:

1. the work would be performed in a proper and workmanlike manner and in accordance with the plans and specifications set out in the Contract (s 18B(a));

2. the materials supplied would be good and suitable for the purpose for which they were to be used (s 18B(b)); and

3. the work and any materials used would be reasonably fit for the specified purpose made known to Brookfield for which the work was required and the result that the Owners Corporation desired to achieve (s 18B(f)).

32. As I have said, for the purposes of the warranty under s 18B(a) of the HBA, the “specifications set out in the contract” included that the facade of the building would be designed and constructed in accordance with the Hyder Specification.

33. The Owners Corporation’s case is that the facade does not comply with the Hyder Specification (because of leaks), and is not reasonably fit for purpose as per the warranty in s 18B(f) for the same reason.

34. Thus, the proper construction of the Hyder Specification is a critical issue in the case.

Measure of damages

35. As I have mentioned, Brookfield accepts that it has some liability to pay damages to the Owners Corporation.

36. It is common ground that the principles governing the remedy for defective building work are those set out by the High Court in Bellgrove v Eldridge [1954] HCA 36; 90 CLR 613.

37. Mr Ashhurst summarised the principles (in a manner which I understand to be uncontroversial) as follows.

38. Assuming that each of loss and damage, breach and a relevant causal connection is established, Bellgrove v Eldridge is authority that the measure of damages for alleged defective work is the reasonable costs of rectification, and that:

1. the fundamental principle for damages is that the sum awarded should be such an amount as will put an injured party in the same position it would have been in if it had not sustained the injury or suffered the breach for which damages are claimed. As stated in Robinson v Harman (1848) 1 Exch 850 at 855; 154 ER 363 at 365, “where a party sustains a loss by reason of a breach of contract, he is, so far as money can do it, to be placed in the same situation, with respect to damages, as if the contract had been performed”;

2. in claims for building defects, the prima facie measure of damages is the “amount required to rectify the defects complained of and so give to [the plaintiff] the equivalent of a building on [his or her] land which is substantially in accordance with the contract” (at 617 per Dixon CJ, Webb and Taylor JJ);

3. the qualification to that general principle is that “not only must the work undertaken be necessary to produce conformity [with the contract], but that also, it must be a reasonable course to adopt” (at 618); and

4. it is a question of fact in each case as to what (if any) remedial work is “necessary” and “reasonable”.

39. In Tabcorp Holdings Ltd v Bowen Investments Pty Ltd [2009] HCA 8; 236 CLR 272, the High Court stated that the test of “unreasonableness” is only to be satisfied “by fairly exceptional circumstances”, for example where the innocent party was “merely using a technical breach to secure an uncovenanted profit” (at [17], citing Oliver J in Radford v De Froberville [1977] 1 WLR 1262).

40. Another circumstance in which “unreasonableness” may be established is where the cost of the “proposed rectification is out of all proportion to the benefit to be obtained” (Brewarrina Shire Council v Beckhaus Civil Pty Ltd [2006] NSWCA 361 at [82]-[88], citing South Parklands Hockey & Tennis Centre Inc v Brown Falconer Group Pty Ltd [2004] SASC 81 at 90; see also Wheeler v Ecroplot Pty Ltd [2010] NSWCA 61 per Macfarlan JA (with whom McColl and Basten JJA agreed) at [81]).

The Sub-Contract

41. By the Sub-Contract, James agreed to:

“Supply all labour, materials, plant and equipment for the complete design, documentation, supply, installation and certification of the podium and tower glazing and associated works to the Beau Monde all as necessary to complete the Principal Works in accordance with the [Contract], contract documents, drawings, specifications and authority requirements”.

42. The Sub-Contract sum was $4,016,736.

43. James did not supply all of the elements of the facade. It supplied the aluminium and glazing window elements and doors, as well as the aluminium curtain wall elements. It did not design or supply the pre-cast panels, the fibre cement sheeting or the balconies.

44. The Hyder Specification was also incorporated into the Sub-Contract, albeit in a form different in one material respect to that incorporated into the Contract. I discuss this further below.

45. Before turning to the detail of the Hyder Specification, I will deal with the Owners Corporation’s claim against James under the HBA and the question of whether either Brookfield or James owed the Owners Corporation a common law duty of care of the kind contended for.

The Owners Corporation’s claim against James under s 18D(1A) of the HBA

Is the claim maintainable?

46. Sections 18C, 18D(1) and 18D(1A) are, relevantly, in the following terms:

“18C   (1) A person who is the immediate successor in title to…a developer who has done residential building work on land is entitled to the benefit of the statutory warranties as if the…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.

(2) For the purposes of this section, residential building work done on behalf of a developer is taken to have been done by the developer.

…

18D(1)   A person who is a successor in title to a person entitled to the benefit of a statutory warranty under this Act is entitled to the same rights as the person’s predecessor in title in respect of the statutory warranty.

18D(1A)    A person who is a non-contracting owner in relation to a contract to do residential building work on land is entitled (and is taken to have always been entitled) to the same rights as those that a party to the contract has in respect of a statutory warranty.”

47. “Non-contracting owner” is defined in Schedule 1 of the HBA as follows:

“[N]on-contracting owner, in relation to a contract to do residential building work on land, means [a]…corporation that is the owner of the land but is not a party to the contact and includes any successor in title to the owner”.

48. As I have said, the Owners Corporation’s claim against James is made under s 18D(1A).

49. The Owners Corporation claims that:

1. Eastmark was a “non-contracting owner” vis-à-vis the Sub-Contract;

2. the effect of s 18D(1A) of the HBA was to provide Eastmark, as a non-contracting owner, the same rights against James as Brookfield had in respect of the s 18B warranties implied into the Sub-Contract; and

3. by reason of s 18D(1) of the HBA, the Owners Corporation, as successor in title to Eastmark, is entitled to the same rights.

50. That would be a dramatic result. If a developer is a “non-contracting owner” vis-à-vis its builders’ sub-contractors, it would also be a “non-contracting owner” vis-à-vis that sub-contractor’s sub-contractors, and that sub-contractor’s sub-contractors, and so on ad infinitum. It would mean that an Owners Corporation, as successor in title to a developer, would be entitled to pursue for breach of s 18B warranties not only the builder that contracted with the developer, but the builder’s sub-contractors, the sub-contractor’s sub-contractors and so on.

51. In my opinion, the Owners Corporation’s contentions are not correct. Eastmark was not a “non-contracting owner” vis-à-vis the Sub-Contract.

52. The definition of “non-contracting owner” directs attention to the entity (here, relevantly, the “corporation”: Eastmark) that is the “owner of the land”, and includes “any successor in title” to that entity. The “land” referred to must be the “land” to which the contract to do residential building work relates (hence the opening words of the definition: “in relation to a contract to do residential building work on land”). That entity (and thus its successor in title) is a “non-contracting owner” it if is not a party to that contract; that is, the contract to do residential building work on the land owned by that entity.

53. Thus, s 18D(1A) speaks of a person who is a non-contracting owner “in relation to a contract to do residential building work”. That contract must be the same contract referred to in the definition of “non-contracting owner”; namely, the contract to which the “non-contracting owner” is not a party. That must be the contract to do residential building work on that party’s land; the building contract. Not a sub-contract to the building contract.

54. Had a joint venturer of Eastmark, rather than Eastmark itself, been party to the Contract (as happened in Ace Woollahra Pty Ltd v The Owners – Strata Plan No 61424 [2010] NSWCA 101; 77 NSWLR 613), the effect of s 18D(1A) would be to give Eastmark, as the owner of the land, and the Owners Corporation as its successor in title, the benefit of the s 18B statutory warranties vis-à-vis Brookfield.

55. Indeed, s 18D(1A) and the definition of “non-contracting owner” were introduced into the HBA to achieve just that result. The second reading speech and explanatory notes to the legislation which introduced s 18D(1A) and the definition of “non-contracting owner” into the HBA (the Home Building Amendment (Warranties and Insurance) Act 2010 (NSW)) make clear that the intended effect of the new provisions was to overcome the effect of the Court of Appeal’s decision in Ace Woollahra. The effect of that decision was, to adopt the words of the explanatory notes, “that only a contracting party and any successors in title to that person are entitled to enforce the statutory warranties under Part 2C of the [HBA]…”.

56. The explanatory notes continued:

“The object of this Bill is to amend the [HBA] to ensure that, where a contractor enters into a contract for residential building work on land with a party or parties who are not the owners of the land, the owner or owners of the land will be deemed to be persons on whose behalf work is done and will be entitled to the benefit of any statutory warranty. As a consequence, any successors in title will also be able to recover for the breach of statutory warranty”.

57. But here, as Eastmark was a party to the Contract, s 18D(1A) has no work to do. It does not give Eastmark any right against sub-contractors of Brookfield. The Owners Corporation cannot be in any better position.

58. I find this conclusion apparent from the language used in the definition of “non-contracting owner”. It is confirmed by consideration of the avowed legislative purpose of the provisions.

59. In its reply closing submissions, the Owners Corporation referred to s 3A(1A) and s 18C(2) of the HBA and argued that these subsections “bridge the last gap between” the Owners Corporation and James.

60. Section 3A of the HBA is in the following terms:

“3A Application of provisions to developers

(1)    For the purposes of this Act, an individual, a partnership or a corporation on whose behalf residential building work is done in the circumstances set out in subsection (2) is a developer in relation to that residential building work.

(1A)    Residential building work done on land in the circumstances set out in subsection (2) is, for the purpose of determining who is a developer in relation to the work, deemed to have been done on behalf of the owner of the land (in addition to any person on whose behalf the work was actually done).

Note:    This makes the owner of the land a developer even if the work is actually done on behalf of another person (for example, on behalf of a party to a joint venture agreement with the owner for the development of the land). The other person on whose behalf the work is actually done is also a developer in relation to the work.

(2)    The circumstances are:

(a)    the residential building work is done in connection with an existing or proposed dwelling in a building or residential development where 4 or more of the existing or proposed dwellings are or will be owned by the individual, partnership or corporation, or

(b)    the residential building work is done in connection with an existing or proposed retirement village or accommodation specially designed for the disabled where all of the residential units are or will be owned by the individual, partnership or corporation.”

61. I found the Owners Corporation’s reply closing submissions somewhat opaque on this point and asked for clarification. In response, the Owners Corporation provided further closing written submissions. Those submissions did not assist me to understand the Owners Corporation’s argument.

62. Section 3A(1A) only applies in the circumstances set out in s 3A(2). For the purposes of considering the Owners Corporation’s argument, I have assumed that four or more of the proposed dwellings at Beau Monde were to be owned by Eastmark, such that s 3A(2)(a), and thus s 3A(1A), is enlivened.

63. In those circumstances, I understand that, in the context of the facts of this case, the effect of s 3A(1A) is that James is deemed to have done the residential building work at Beau Monde on behalf of Eastmark, and that Eastmark (as the owner of the land) is deemed to be a developer.

64. But that seems a moot point. Here, Eastmark was actually the developer. I fail to see what extra work s 3A(1A) does that is relevant to this case.

65. The terms of s 18C(2) are set out at [46] above. The effect of s 18C(2) (when read with s 18C(1)) is that the Owners Corporation, as immediate successor in title to Eastmark (the “developer on whose behalf residential building work [was] done” under s 3A), is entitled to the benefit of the statutory warranties as if Eastmark had done the work under a contract with the Owners Corporation. The statutory warranties referred to must be those in the Contract that s 18C deems to exist between the Owners Corporation and Eastmark: that is, statutory warranties by Eastmark in favour of the Owners Corporation.

66. However, I fail to see how these sections have the effect of giving the Owners Corporation rights against James as a sub-contractor.

“An alternate road to James”

67. Alternatively, the Owners Corporation argued that the expression “successor in title” in s 18C of the HBA includes Eastmark as a “successor in title to the work” done at Beau Monde by James under the Sub-Contract. The Owners Corporation contended that it then, in turn, itself became a “successor in title to the work”.

68. That submission was not developed. It cannot be right. The reference to “successor in title” in the HBA must mean “successor in title” to the land. There is no textual support in the language of the statute for any other conclusion.

Conclusion

69. My conclusion is that the Owners Corporation has no rights against James under the HBA. The Owners Corporation’s claim against James under the HBA therefore fails.

Is the claim out of time?

70. In any event, if, contrary to those conclusions, the Owners Corporation was entitled to bring a claim against James for breach of the HBA statutory warranties, such claim has been brought out of time and is statute barred.

71. The limitation period applicable to s 18B warranties was, at the relevant time (the date of the Sub-Contract), seven years from “completion”.

72. Thus, at that time, s 18E of the HBA provided that:

“Proceedings for a breach of a statutory warranty must be commenced within 7 years after:

(a) the completion of the work to which it relates…”.

73. Section 3B of the HBA currently provides:

“3B   Date of completion of residential building work

(1A)   This section does not apply to residential building work to which section 3C applies.

Note. Section 3C provides for the date of completion of new buildings in strata schemes.

(1)   The completion of residential building work occurs on the date that the work is complete within the meaning of the contract under which the work was done.

(2)   If the contract does not provide for when work is complete (or there is no contract), the completion of residential building work occurs on practical completion of the work, which is when the work is completed except for any omissions or defects that do not prevent the work from being reasonably capable of being used for its intended purpose.

(3)   It is to be presumed (unless an earlier date for practical completion can be established) that practical completion of residential building work occurred on the earliest of whichever of the following dates can be established for the work:

(a)   the date on which the contractor handed over possession of the work to the owner,

(b)    the date on which the contractor last attended the site to carry out work (other than work to remedy any defect that does not affect practical completion),

(c)    the date of issue of an occupation certificate under the Environmental Planning and Assessment Act 1979 that authorises commencement of the use or occupation of the work,

(d)    (in the case of owner-builder work) the date that is 18 months after the issue of the owner-builder permit for the work.

…

(5)    This section applies for the purposes of determining when completion of residential building work occurs for the purposes of any provision of this Act, the regulations or a contract of insurance under the Home Building Compensation Fund.”

74. Section 3B is applicable to this case: see Schedule 4 s 106 of the HBA. The Owners Corporation accepted the section had retrospective effect, albeit “not so as to affect any finalised litigation or claims or any claims or litigation currently under way”. That qualification is not relevant, as these proceedings had not commenced on the date s 3B was introduced into the HBA.

75. James referred to s 3B in its written closing submissions. Mr Miller emphasised in oral submissions what he submitted to be its effect. The Owners Corporation twice referred to s 3B in that part of its closing reply submissions that addressed James’s contention that the Owners Corporation’s claim against it under the HBA (if maintainable at all) was out of time. And yet the Owners Corporation did not address, nor attempt to engage with, James’s submissions as to the vital role s 3B plays in James’s case; namely, that the HBA claim is out of time. Although at the outset of its submissions on this issue the Owners Corporation recited James’s submissions (which contained a reference therein to s 3B), it did not further deal with s 3B.

76. Section 18E speaks of “completion of the work” to which the “proceedings for a breach of a statutory warranty” relates.

77. Section 3B(1) speaks of completion within the meaning of the “contract under which the work was done”.

78. The sections thus direct attention to when completion took place under the contract that is said to give rise to the claim for breach of statutory warranty.

79. Here, that contract is the Sub-Contract. The Owners Corporation’s claim against James (assuming it is maintainable at all) relates to work that James did under the Sub-Contract. Thus, the seven year period under s 18E must run from the date when completion took place under the Sub-Contract, and not from when completion took place under the Contract.

80. In that regard, in its reply submissions, the Owners Corporation referred to the observations of the Court of Appeal in The Owners – Strata Plan No 64757 v MJA Group Pty Ltd [2011] NSWCA 236; 81 NSWLR 426 and in Vero Insurance Ltd v Kassem [2011] NSWCA 381.

81. I see nothing in those decisions which is inconsistent with the conclusions to which I have come.

82. On the contrary, in Vero v Kassem Campbell JA said, at [67]:

“Consistently with this authority, the limitation period concerning any particular item of damage would commence to run when the work to which the damage relates was completed. That is not necessarily the date on which the works as a whole were completed. MJA Group does not enable one to decide just how finely one subdivides the various tasks that went into the totality of the works, to identify ‘the work to which [a particular claim for breach of warranty] relates’. However it accepts that at least completion of all the work done by the particular contractor or subcontractor who caused the defect can be completion of ‘the work to which it relates’. This has the potential to create a difficulty for a purchaser of residential real estate, if a defect is caused by the work of a contractor whose tasks are completed long before the works as a whole are complete. That is because it is likely in practice to shorten the time in which someone with the benefit of the warranty must find out about the defects and start legal proceedings. However, that is what MJA Group has held the words to mean.”

83. In its reply submissions, the Owners Corporation said that “it does not agree with Campbell JA’s view” and that his Honour’s observations were obiter dicta. I do not agree that what Campbell JA said was obiter. It was central to his Honour’s reasoning process in the proceedings. And if the Owners Corporation was suggesting that his Honour was in error, then I disagree.

84. As set out at [73] above, s 3B of the HBA provides guidance as to when “completion” of the Sub-Contract is taken to have occurred.

85. The Sub-Contract did not state when “completion” was to take place. Accordingly, s 3B(1) is not applicable.

86. Thus, the effect of s 3B(2) and (3) of the HBA is that completion is taken to occur on “practical completion of the work”, which is defined in s 3B(2) as being:

“…when the work is completed except for any omissions or defects that do not prevent the work from being reasonably capable of being used for its intended purpose.”

87. By virtue of s 3B(3)(b), practical completion is presumed to be, relevantly:

“[T]he date on which the contractor last attended the site to carry out work (other than work to remedy any defect that does not affect practical completion)”.

88. The Sub-Contract contained a similar provision:

“‘Practical Completion’ is that stage in the execution of the Head Contract work under the [Sub] Contract when -

(a)   the Head Contract Works are complete except for minor omissions and minor defects -

(i)   which do not prevent the Head Contract Works from being reasonably capable of being used for their intended purpose; and

(ii)   which the Principal determines the Contractor has reasonable grounds for not promptly rectifying; and

(iii)   rectification of which will not prejudice the convenient use of the Works; and

(b)   those tests which are required by any Legislative Requirement or under the contract to be carried out and passed before the works reach practical completion, have been carried out and passed to the satisfaction of the Superintendent

(c)   documents and other information required under the Contract which, in the opinion of the Contractor, are essential for the use, operation and maintenance of the Works have been supplied.”

89. The date on which James last attended the site to carry out work (other than work to remedy a defect not affecting practical completion) was some time in February 2005.

90. Thus, on 3 February 2005, Brookfield sent James a “Subcontractor Warranty Deed Poll”, under cover of a letter which stated:

“Can you please complete the attached Deed Poll and mail the original with your warranty, operation and maintenance manuals”.

91. On 15 February 2005, James wrote to Brookfield enclosing the Warranty Deed Poll, duly executed, together with its “standard Warranty & Glazing Certificates and Maintenance Manuals” for the Beau Monde project.

92. The Warranty Deed Poll provided for a seven year warranty that:

“…the items or products or supplied by [James] in connection with the [Beau Monde] Project will satisfy all of the requirements of [a nominated specification] and, without limiting the foregoing, that those items or products are fit for the purposes for which such items or products are ordinarily used”.

93. On 25 February 2005, James sent Brookfield a payment claim under the Building and Construction Industry Security of Payment Act1999 (NSW) which described all work as being 100 per cent complete.

94. That suggests that practical completion of the Sub-Contract took place, at the latest, by 25 February 2005. In my opinion, the seven year period under the former s 18E of the HBA ran from, at the latest, this stage. It thus expired on or about 25 February 2012.

95. There is in evidence a note made by Mr Glen Gilligan, one of James’s project managers, on 7 April 2005.

96. The note refers to the “last lot of defects from Beau Monde” in respect of which he wrote “most are scratches”. That note suggests some minor defect work (to rectify “scratches”) was done in April 2005. However, it does not alter my conclusion that practical completion took place earlier.

97. The Owners Corporation commenced proceedings against James on 8 March 2012. Thus, the proceedings, if maintainable at all, are out of time.

Duty of Care

98. The Owners Corporation contends that Brookfield and James owed it a duty of care of the kind set out at [16] above.

99. So far as concerns Brookfield, the point is probably of little practical significance, as it is in any event liable to the Owners Corporation under the Contract and by reason of s 18C of the HBA. That may explain why Mr Ashhurst did not offer any detailed submissions on the question.

100. However, so far as James is concerned, the point is of vital significance. It has no contractual relationship with the Owners Corporation and, as I have found, no liability to the Owners Corporation by reason of the HBA.

101. The circumstances in which the common law imposes a duty of care to avoid pure economic loss were very recently reviewed by McDougall J in Chan v Acres [2015] NSWSC 1885. His Honour’s summary of the present state of the law in this area (at [93] to [156] is pellucid: I could not possibly improve on it. His Honour was, however, dealing with a factual situation different to that here. In Chan, the owner of a house in Wahroonga sued his vendor, who had carried out significant renovations as an owner builder, the engineer that had inspected the work on the vendor’s behalf, and the local council (which was the principal certifying authority). His Honour held that, in the particular circumstances of the case, the engineer owed no duty to the plaintiff (at [255] but that the council did owe such a duty (at [373]).

102. In this case, the Owners Corporation is immediately confronted with the decision of the High Court in Brookfield.

103. In that case, in circumstances similar to, but not exactly the same as, those in this case, the relevant owners corporation claimed that Brookfield owed it a duty to exercise reasonable care in the construction of a strata complex. The duty alleged was to avoid causing the owners corporation economic loss resulting from latent defects in the common property. The seven Justices of the Court delivered four judgments. Each rejected the owners corporation’s contentions and held that Brookfield owed it no duty of care.

104. The Owners Corporation contends that Brookfield is distinguishable from this case. In my opinion, although the facts in Brookfield were a little different to those here, the reasoning of the High Court compels the conclusion that neither Brookfield nor James owed the Owners Corporation a duty of the kind contended for in this case.

105. In Brookfield, the circumstances were that:

1. On 11 August 1997, the owner and developer of a property in Chatswood, Chelsea Apartments Pty Ltd, entered into an agreement (“the Master Agreement”) with the Stockland Trust Group to design and construct the building and to lease to a Stockland subsidiary, Park Hotel Management Pty Ltd, apartments on certain floors. The apartments were to be operated as serviced apartments under the “Holiday Inn” brand, and sold to investors subject to the leases to Park Hotel.

2. On 5 November 1997, Chelsea and Brookfield entered a design and construct contract (“the Building Contract”) for the construction of the building for some $57.5 million. The Building Contract contained detailed warranties concerning the quality of the material and work to be provided by Brookfield, including a defects liability period.

3. Chelsea marketed the project and sold apartments in the building to investors subject to the leases to Park Hotels. Those sales were completed once the strata plan was registered and the plaintiff owners corporation came into existence. Each of the sale contracts contained provisions obliging Chelsea, before completion, to cause the property and common property to be finished in a proper and workmanlike manner and to repair other defects within a specified time after completion.

106. Although the Court delivered four sets of reasons, each member of the Court held that the question of the owners corporation’s vulnerability to the possibility of economic loss arising from Brookfield’s construction of the building was the critical factor in determining whether a duty of care arose as between the parties: see French CJ at [22] and [23]; Hayne and Kiefel JJ at [51]; Crennan, Bell and Keane JJ at [130]; and Gageler J at [185].

107. Thus, French CJ, referring to Perre v Apand Pty Ltd (1999) 198 CLR 180 at [118] per McHugh J, said at [22]:

“Those considerations may be seen as elements of the notion of ‘vulnerability’, which has become an important consideration in determining the existence of a duty of care for pure economic loss. In this context, it refers to the plaintiff’s incapacity or limited capacity to take steps to protect itself from economic loss arising out of the defendant’s conduct.”

108. Hayne and Kiefel JJ, referring to the Court’s earlier decision in Woolcock Street Investments Pty Ltd v CDG Pty Ltd [2004] HCA 16; 216 CLR 515, said at [51]:

“It is the question of vulnerability which, consistent with the decision in Woolcock Street, must determine the outcome of this appeal.”

109. Similarly, Crennan, Bell and Keane JJ said at [130]:

“Further in this regard, the plurality in Woolcock Street Investments noted that in decisions such as Perre v Apand Pty Ltd, Hill v Van Erp [(1997) 188 CLR 159] and Esanda Finance Corporation Ltd v Peat Marwick Hungerfords [(1997) 188 CLR 241], the concept of vulnerability could be invoked as the rationale explaining the exceptions to the general rule. Vulnerability, in this field of discourse, is concerned not only with the reasonable foreseeability of loss if reasonable care is not taken by the defendant, but also, and importantly, with the inability of the plaintiff to take steps to protect itself from the risk of the loss. Their Honours held that the concept of vulnerability did not afford a basis for holding the defendant liable in that case because the facts of the case did:

not show that the appellant could not have protected itself against the economic loss it alleges it has suffered. It is agreed that no warranty of freedom from defect was included in the contract by which the appellant bought the land, and that there was no assignment to the appellant of any rights which the vendor may have had against third parties in respect of any claim for defects in the building. Those facts describe what did happen. They say nothing about what could have been done to cast on the respondents the burden of the economic consequences of any negligence by the respondents [Woolcock Street at [31]].”

110. Gageler J (at [182]) referred to the observation of McHugh J at [94] of Woolcock Street that:

“…the capacity of a person to protect him or herself from damage by means of contractual obligations is merely one — although often a decisive — reason for rejecting the existence of a duty of care in tort in cases of pure economic loss”.

111. Each member of the Court concluded that the owners corporation was not relevantly vulnerable, essentially because those that the owners corporation represented were adequately protected by contract and were sophisticated investors.

112. Hayne and Kiefel JJ said (at [55] and [58]):

“It is enough to notice that the relevant parties made contracts for the construction of the building and for the subsequent sale of parts of the building which were contracts that could (and did) make provisions regulating the quality of what was to be received in return for payment of the price. The making of those contracts denies vulnerability.

…

It is neither necessary nor profitable to attempt to define what would or would not constitute vulnerability. It is enough to observe that both the developer and the original purchasers made contracts, including the standard contracts, which gave rights to have remedied defects in the common property vested in the Owners Corporation.”

113. Crennan, Bell and Keane JJ went further, stating at [150]:

"The circumstance that the [owners corporation] did not exist at the time that the defective work was carried out points against, rather than in favour of, the duty of care propounded by the [owners corporation] given that on this basis it could not have relied upon [Brookfield] in any way. There is no basis for a finding of fact that there was an assumption of responsibility by [Brookfield] in favour of the [owners corporation], or known reliance on [Brookfield] on the part of the [owners corporation], in relation to the quality of the common property of the serviced apartment complex”.

114. The notion that an owners corporation suffers no loss at all in circumstances such as these was also raised, but not resolved. Thus Crennan, Bell and Keane JJ continued:

“Further, an owners corporation acquires the common property in a strata scheme without any outlay on its part. Its assets are not diminished by the acquisition, at least if the common property is worth more than the cost of repairing latent defects (and there is no suggestion here that the common property is worth less than the cost of repair). Accordingly, if one considers the owners corporation independently of the individual lot owners, it is impossible to see that it has suffered any loss by reason of the quality of the common property vested in it.”

And Hayne and Kiefel JJ stated at [45]:

“There may be a real and lively debate about whether the [o]wners [c]orporation itself suffered any loss as a result of defects in the common property. The better view may be that any loss constituted or occasioned by defects in the common property was suffered by the owners of the lots for whom the [o]wners [c]orporation held the common property as ‘agent’. It is not necessary, however, to pursue that question.”

115. In its closing submissions, the Owners Corporation advanced a number of reasons for distinguishing Brookfield from this case.

116. The first was that, in this case, “there is no sophisticated building contract…and…no contract regulating the rectification of defects”.

117. I cannot understand how the Owners Corporation put that submission. There is a “sophisticated building contract”; namely, the Contract. The Contract contains detailed provisions concerning defects and a 12 month liability period.

118. The second reason was that, the Owners Corporation submitted, “the simple fact is that the builder and the developer are the same entity”.

119. Again, I cannot understand how the Owners Corporation put that submission. In this case, the builder was Brookfield. The developer was Eastmark. There is no relationship between those two companies. They are certainly not the “same entity”.

120. The third reason was that in this case:

“…the lot owners did not acquire their lots under contracts containing detailed provisions relating to the construction of the building, and the developer’s obligations to undertake repairs”.

121. However, that has not been established. The contracts whereby lot owners acquired their lots in Beau Monde are not in evidence.

122. Fourth, the Owners Corporation submitted that, unlike the circumstances of Brookfield, in this case:

“…the lot owners were not sophisticated investors, but acquired their lots as residential dwellings, not serviced apartments.”

123. But there is no evidence as to the identity of lot owners at Beau Monde.

124. It is true that, unlike the position in Brookfield, there is no suggestion in these proceedings that any part of Beau Monde was to operate as serviced apartments, nor that any person acquired their lot in Beau Monde on this basis. But nor is there any other evidence as to the basis upon which lots were acquired. Beau Monde comprises 241 residential lots. Some lot owners may be owner-occupiers. But others may well be investors.

125. And there is a further factor, which I find decisive. Unlike the owners corporation in Brookfield, the Owners Corporation in this case has the benefit of the statutory warranties under the HBA.

126. In Brookfield, Crennan, Bell and Keane JJ said at [133]:

“Statutory provisions may supplement the common law of contract by providing for special protection to identified classes of purchasers on the ground, for example, that they may not be expected to be sufficiently astute to protect their own economic interests. Part 2C of the [HBA] is an example of such a statutory regime.”

127. It is common ground that the Owners Corporation has the benefit of that statutory protection. As successor in title to Eastmark, it is entitled to bring proceedings against Brookfield relying on the statutory warranties in the HBA. As I have set out above, that is exactly what it has done in these proceedings; and Brookfield has conceded some liability on that basis.

128. As the trial judge in Brookfield (McDougall J, whose decision was ultimately upheld in the High Court) emphasised, the owners corporation in that case did not have the benefit of the statutory regime under the HBA (Owners Corporation Strata Plan 61288 v Brookfield Multiplex Ltd [2012] NSWSC 1219 at [86]). His Honour referred to his Honour’s earlier observations in the “Star of the Sea” case (Owners Corporation Strata Plan 72535 v Brookfield Multiplex Ltd [2012] NSWSC 712), and said:

“A key feature of my reasoning in that case was that the owners corporation had the benefit of the statutory implied warranties, and what I have called above statutory privity of contract, against the developer and the builder. I said in substance that it was not appropriate for the court to impose some further or more onerous duty of care.” [At [85]]

129. In the Star of the Sea case, his Honour opined at [144]:

“In circumstances where the legislature has considered, and made clear provision for, the extent to which a builder is liable to a subsequent owner, I think that the courts should be slow to substitute their own judgment for that of the legislature”.

130. His Honour expressed a similar view in Chan v Acres at [370] – [371], and observed that the joint judgment in Woolcock Street at [35] and the judgment of Gageler J in Brookfield at [186] appeared to support the same proposition. However, in the particular circumstances before his Honour, he did not find that consideration decisive.

131. In my opinion, the fact that the statutory warranties under the HBA are available to the Owners Corporation makes this an even stronger case than Brookfield for denying the existence of a duty of care owed by Brookfield to the Owners Corporation. It points strongly to the conclusion that the Owners Corporation is not vulnerable in the relevant sense.

132. It also provides a powerful basis to deny that James owed a duty to the Owners Corporation. The availability to the Owners Corporation of statutory warranties against Brookfield points to the conclusion that it is not vulnerable to any defective workmanship by Brookfield’s sub-contractor (for whom, vis-à-vis the Owners Corporation, Brookfield is responsible).

133. The Owners Corporation referred to the decision of the Victorian Court of Appeal in Moorabool Shire Council v Taitapanui [2006] VSCA 30. That case concerned a council said to be vicariously liable for the conduct of a building surveyor that it employed. The surveyor had certified that the foundations of a dwelling were sound. The foundations later collapsed due to a critical design flaw. The successors in title to the owners of the dwelling at the time of its certification sued the council for economic loss.

134. The Owners Corporation referred, with little elaboration, to the observations of Ormiston and Ashley JJA (at [181]) in that case that the statutory warranties implied by the Victorian equivalent of the HBA (the Domestic Building Contracts Act 1995 (Vic)) into the relevant building contract (which ran in favour of the successors in title) were not effective, in the circumstances of that case, to “displace the common law as it should otherwise apply in respect of the quite different conduct” of the surveyor.

135. However, the circumstances before their Honours were quite different to those before me. In any event, the decision was made well before the High Court’s decision in Brookfield. I do not see how their Honours’ observations cast any light on the question before me.

130. The Owners Corporation also referred to The Owners Corporation – SP 69567 v Landson Alliance Australia Pty Limited [2014] NSWSC 1592 in which, shortly after the decision of the High Court in Brookfield, McDougall J refused to strike out a negligence claim by an owners corporation against a builder.

131. It is true that McDougall J declined to strike out the claim. However, this was at an interlocutory stage of proceedings. His Honour observed at [59] that the owners corporation would face “an extremely difficult case at trial” to distinguish its case from Brookfield. His Honour also observed that the decision in Brookfield placed “very formidable obstacles” in the owners corporation’s “path to success” (at [60]).

132. My conclusion is that the High Court’s decision in Brookfield is not relevantly distinguishable from this case. Indeed, to the extent that I have mentioned, this case seems an even stronger one in which to deny the existence of a duty of care of the kind contended for.

The Hyder Specification

139. So far as concerns the facade, the critical matter dividing the parties is the proper construction of the Hyder Specification.

140. As I have said, the Owners Corporation’s case is that the facade needs to be replaced. The Owners Corporation contends that the total cost of the necessary facade works, including replacement of windows, balcony doors and curtain walls, is in the order of $14.8 million.

141. That claim assumes the correctness of the proposition advanced by the Owners Corporation that, on its proper construction, the Hyder Specification (and thus the Contract) requires that the facade be designed and constructed to be “fully weather tight”, such that it would be able to pass a water test of the kind described in AS 4284 “at least during the 25 year period before the ‘first major maintenance’” referred to in the specification.

142. The Owners Corporation adduced a considerable body of evidence of water testing on some parts of the facade, principally from an engineer, Mr Peter Lalas. That water testing has caused water ingress through the relevant window assembly elements, and into the apartments in which those window assemblies are installed.

143. The relevance and appropriateness of those water tests depends upon whether the Owners Corporation’s construction of the Hyder Specification is correct.

144. Accordingly, I will now consider the provisions of the Hyder Specification and the terms of AS 4284 (and two other relevant standards), before dealing with the proper construction of the Hyder Specification.

The provisions of the Hyder Specification

145. The Hyder Specification is described as a “Performance Specification”.

146. Thus, cl 1.1 states:

“This is a performance specification. The architectural drawings and this specification indicate the design intent and establish the required geometry of the visible components, and the minimum acceptable standard to which the facade must be designed, fabricated, installed and tested.

…

The Contractor [i.e. Brookfield in the Contract and James in the Sub-Contract] is fully responsible for the design, procurement, fabrication, installation, testing and certification of the facade system including its interfacing with the structure”.

147. Clause 1.2 describes “the Project” and states, relevantly:

“The residential tower (levels 8-37) is to be clad with aluminium framed, glazed window walling, with areas of curtain walling…”.

148. Clause 1.3 deals with the “Scope of Work” and states:

“The works include the whole external envelope of the tower and podium facade elements, excluding painted concrete and balcony/decking finishes, metal roofing and retail shopfronts.

All frames to be fully panelised and factory assembled. Facade joints, spandrels and other cavities within the systems to be fully pressure equalised and drained. Cladding systems are to be custom-designed, and fabricated from standard sections wherever possible”.

149. Clause 1.5 is headed “Contractor’s Responsibilities” and states:

“It is the Contractor’s responsibility to provide labour, materials, equipment and related items and to design, engineer, test, fabricate, deliver, install, maintain and guarantee a complete and fully weather tight, cladding system in accordance with the design intent of the drawings”.

150. Clause 1.7 is headed “Warranty” and states:

“Provide a warranty for a period of 10 years from the date of practical completion for the structural integrity and weathertightness of the facade systems”.

151. Clause 3 is headed “Performance Requirements” and states:

“Design the facade system in accordance with the following performance parameters”.

152. Those parameters are set out in a table, the relevant parts of which are as follows:

“Performance Parameter

Requirement

1. Design Life

50 years for structural integrity

25 years to first major maintenance

12.Weatherproofing

Cladding to be fully weathertight when tested in line with the requirements of AS4284 (or AS2047 or AS4420).

Non typical facade areas which are not part of the prototype test are to have a similar level of weathertightness to the tested portion.

All facade system jointing, spandrels and other cavities within the system are to be fully drained and pressure equalised.”

153. Clause 5 is headed “Verification” and includes the following:

“5.2.1 Prototype Testing

Conduct prototype testing in accordance with AS 4284 for structural adequacy and weathertightness of the various facade systems.

Alternatively, provide satisfactory evidence in the form of a report from an independent testing laboratory that windows of each type specified have passed the tests applicable to that type specified in AS 2047 or AS 4420 or AS 4284, and comply with the requirements of the specified window rating.”

154. Clause 5.2.2 provides:

“5.2.2 Site Water Testing

Conduct hose tests on random areas as nominated by the Consultant and accepted by the Superintendent to demonstrate weathertightness of the installation. Allow to conduct 10 such tests…

Water test to AAMA 501.2 field hose test standard.”

155. The Hyder Specification as incorporated into the Sub-Contract did not include, relevantly, cl 5.2.1. Evidently, that was because, as I have mentioned, James did not design and construct every element comprising the facade.

Relevant standards

156. The Hyder Specification referred to AS 4284 and AAMA 501.2.

AS 4284

157. Australian Standard AS 4284 is entitled “Testing of building facades”.

158. The standard is said to be based on a “Specification for the performance testing of building facades by the Sirowet method” published by the Commonwealth Scientific and Industrial Research Organisation.

159. The parties refer to testing undertaken in accordance with this standard as “Sirowet testing”.

160. The preface to the standard states:

“The objective of this Standard is to provide those persons or organisations involved with the specification, design, purchasing and construction of building facades with a method of determining the performance of a building facade under wind and other optional loadings. This test method is applicable to complete facades and is intended to assess the overall system performance and interaction of the various facade components.”

161. The standard describes its “scope” as follows:

“This Standard sets out a method for determining the performance of a representative building facade under loading… This test method is applicable to prototype testing in a laboratory as well as on-site testing.”

162. Clause 6 of the standard deals with “sample preparation” and refers to a “test sample” which:

“…with components, shall be representative both in size and shape of the facade of the building”.

163. The standard specified a “test sequence” for the samples which was to be “conducted prior to the structural test”.

164. Appendix A dealt with “sample preparation” and stated:

“The test is a method of assessment of a facade system which has been designed by computation and experience to meet the specified requirements of the purchaser. It is not an alternative method of proving a facade system. This Appendix relates to the preparation of a prototype test sample of the building facade. The two most important objectives in testing building facades are to evaluate the performance of the sample under exposure to simulated environmental conditions before production commences, and to use the sample as an opportunity for the manufacturer to evaluate the fabrication and installation of the sample.

These objections are based on the premise that the sample is a faithful representation of the proposed design (i.e. from drawings and design calculations), and, with the test amendments, a sample of the wall that will be constructed onto the building within the construction tolerances of the structural elements of the building.

…

A full scale prototype has the advantage that performance of actual materials in the facade, interaction at joints and fixing points, and visual appearance can be critically assessed.” [Emphasis added]

165. It is apparent from the words of AS 4284, particularly those emphasised in the last paragraph, that, as Brookfield submitted, the standard is directed to the testing of samples and prototypes in the context of the adequacy of design. It is not directed to the construction work undertaken or the present performance of buildings later in their life. I accept the submission advanced on behalf of James that the reading of the standard suggests that it is not intended to operate as a diagnostic performance testing tool for an aged facade.

166. The standard does not, in terms, state that it is appropriate or suitable for use on aged facades. Indeed, it refers to the performance of a “representative building facade” (see [161] above) and the testing of samples “under exposure to simulated environmental conditions before production commences”.

AAMA 501.2

167. AAMA 501.2 is a document published by the American Architectural Manufacturers Association (“the AAMA”).

168. The AAMA describes itself as “the Source of Performance Standards, Products Certification and Educational Programs for the Fenestration Industry”.

169. In concurrent evidence, Brookfield’s facade expert, Mr Peter Karsai, agreed that AAMA standards are “industry written standards” prepared “by industry for the guidance of industry”, and are “quite often referred to when a gap presents within the Australian standards”.

170. As I discuss below, Mr Lalas spoke somewhat dismissively of the AAMA. However, the fact is that AAMA 501.2 is referred to in the Hyder Specification and was obviously thought by the authors of that document to be appropriate for inclusion. Intriguingly, Mr Lalas is described on the Hyder Specification as its “checker” (although he denied in fact checking it). Further, as I discuss below, Mr Lalas himself used a modified form of AAMA 501.2 on the window assemblies at Beau Monde.

171. The AAMA describes standard 501.2 as follows:

“1.1 The purpose of this document is to provide a quality assurance and diagnostic field water check method for installed…curtain walls… The procedure outlined in this document is not intended to test the rated or specified water performance representative of a wind driven rain event…

NOTE: This field check method is not appropriate for testing of operable components such as operable windows and doors. AAMA 502 is the proper test method for field air leakage resistance and water penetration resistance testing of newly installed operable windows and doors and AAMA 511 is the proper test method for forensic water penetration testing of fenestration products.

1.2 This field check procedure is intended to evaluate those joints, gaskets and sealant details in the glazing which are designed to remain permanently closed and water tight.”

172. The Hyder Specification recommends an “AAMA 501.2 field hose test standard” as part of “site water testing”.

173. The standard makes clear that it is not appropriate for testing operable or openable windows and, thus, is only appropriate for testing permanently closed fenestration systems.

AAMA 511.08

174. AAMA 511.08 is not referred to in the Hyder Specification. It was, however, used by Brookfield’s experts to test the Beau Monde window assemblies and it is convenient to mention it here.

175. AAMA 501.2 nominates AAMA 511 as the appropriate test for “forensic water penetration testing” of building windows. That is made clear from the wording of AAMA 501.2 itself (see [171] above).

176. AAMA 511.08 states:

“Building damage caused by uncontrolled water penetration through exterior walls is a serious concern of owners, contractors, architects and product manufacturers. Often, improper or inadequate leak investigations result in investigators misidentifying the source of water penetration through the exterior wall.

…

Diagnostic testing is an integral part of this systematic investigation; however, this type of testing differs significantly from other AAMA testing documents. The purpose of diagnostic testing is to recreate water leaks that are known to occur. On the other hand, AAMA 502 and AAMA 503 field testing procedures are intended for evaluating newly installed fenestration products or to provide evidence of compliance with a project specification. ASTM E 2128 describes the procedure necessary for a systematic forensic investigation, allowing for the adaptation of testing procedures, such as AAMA 502 and AAMA 503.”

177. Under the heading “Scope and Purpose” the standard provides:

“The purpose of this AAMA Voluntary Guideline is to provide specific information to assist industry professionals in selecting the appropriate adaptations to the existing testing standards for application to field investigations of fenestration products.”

178. Later, the standard states:

“Unlike testing agencies performing the AAMA 502 and AAMA 503 field testing, which is intended for newly installed fenestration products and is based on compliance with a project specification, forensic investigators are required to provide more information than pass/fail criteria.”

179. Under the heading “Forensic Investigation Steps from Testing to Report” the standard states:

“Because building leaks sometimes go unnoticed for a significant period of time, careful consideration must be made to ensure that the reported leak history correlates with field observations. Additionally, in many cases investigators use inappropriate field testing adaptations to AAMA 502 and AAMA 503 to investigate the reported water penetration. A common incorrect adaptation involves performing differential pressure water testing on fenestration products which are often higher than the pressures the fenestration products routinely experienced during wind-driven rain events that produced water penetration. Field testing at these high pressures may result in new leaks and the false conclusion that the fenestration product is the cause of all of the reported water penetration. Field testing at elevated pressures may also conceal defects which would have produced leakage at lower pressures.”

Proper construction of the Hyder Specification

180. The Hyder Specification forms part of both of the relevant design and construct contracts: the Contract and the Sub-Contact. As I have set out, it states, in its opening words, that it is a “performance specification”. And, consistently with its incorporation into design and construct contracts, it states that it establishes “the minimum acceptable standard to which the facade must be designed, fabricated, installed and tested” (see [146] above).

181. The specification refers, on five occasions, to “weathertightness”.

182. First, it imposed on Brookfield and James as “the contractor” a “responsibility” to “design, engineer, test, fabricate, deliver, install, maintain and guarantee” a “complete and fully weather tight” cladding system (cl 1.5 set out at [149] above).

183. Second, it provided that the contractor would give a 10 year “warranty” from the date of practical completion “for the structural integrity and weathertightness of the facade systems” (cl 1.7 set out at [150] above).

184. Third, it specified that the contractor “design the facade system” in accordance with “performance parameters”. Those parameters included a “design life” of 50 years “for structural integrity” and 25 years “to first major maintenance”, and that the cladding be “fully weathertight” when tested “in line” with AS 4284 requirements (cl 3 set out at [151] and [152] above).

185. Fourth, under the heading “Verification”, it obliged Brookfield (but not James) to conduct “prototype testing” in accordance with AS 4284 for “structural adequacy and weathertightness of the various facade systems” (or alternatively, to arrange for an independent testing laboratory to do so) (cl 5.2.1 set out at [153] above).

186. Fifth, again under the heading “Verification”, it obliged both Brookfield and James to conduct 10 “hose tests” on “random areas” in accordance with AAMA 501.2, in order to “demonstrate weathertightness of the installation” (cl 5.2.2 set out at [154] above).

187. My attention was not drawn to any authorities dealing with the meaning of “weather tightness”. My own research has not revealed any such authority.

188. Absent authority on the subject, I would construe “weather tight” to mean able to withstand any weather likely to be encountered in natural conditions. In these proceedings, the question of weather tightness is in respect of water ingress. In my opinion, in order for the facade to be weather tight, it had to be designed and constructed so as, relevantly, to prevent water entry into the habitable areas of the building (assuming the windows were closed) during any rain or storm events likely to be encountered in the part of Sydney where the building is located. As I understand it, each of the parties, and their expert facade witnesses (Mr Lalas for the Owners Corporation, Mr Karsai and Mr Timothy Womack for Brookfield, and Mr David Hunton for James), were agreed on this.

189. The plaintiff’s submissions focussed on cl 3 of the Hyder Specification and, in particular, item 12 of the table at cl 3 (see [152] above).

190. Thus , its closing submissions, the Owners Corporation submitted:

“The Plaintiff’s construction of clause 3.12 of the Hyder Specification is that the facade must be designed and constructed to be ‘fully weathertight’, and that the standard of ‘weathertightness’ is measured by an objective standard, namely the requirement to pass an AS4284 test, at least during the 25 year period before the ‘first major maintenance’.

…The facade had to have that quality [i.e. fully weather tight when tested in accordance with AS 4284] both when verified under the provisions of Part 5 of the Specification, and had to remain to that standard thereafter for at least the first 25 years of its design life, and that the facade would be considered as being ‘fully weathertight’ if, and when, tested to the procedure set out in AS 4284 in that period”. [Emphasis added]

191. The Owners Corporation put that submission as applying “at least” during the first 25 years of the building’s “design life”. However, if the submission is right, it must also apply for the second 25 years of the building’s design life; that is, for the entire design life of 50 years (see [152] above).

192. Thus, the effect of the Owners Corporation’s submission is that, if at any time during the period of 50 years from when the building was constructed (that is, from 2005 to 2055) the facade was subjected to an AS 4284 water test, it should be “fully weathertight”; that is, it should not permit water ingress during such testing.

193. That submission really amounts to a submission that the Hyder Specification should be construed as if the contractor warranted or guaranteed that the facade would be fully weather tight when tested in accordance with AS 4284 for 50 years.

194. Clause 3 of the Hyder Specification is directed to the performance parameters in accordance with which the facade must be designed. The words that I have emphasised in the Owners Corporation’s submission (“and constructed”) introduce into cl 3 an element that is not there. Clause 3 does not, in terms, require that the facade be designed “and constructed” to have the design life specified or to be “fully weathertight when tested in line with the requirements of AS4284”. Clause 3, in my opinion, sets out the performance requirements for the design of the facade, and not the performance requirements of the facade itself.

429. On the other hand, Mr Abbott opined that although rust could be caused by the presence of water in the screed, it could also be caused by other matters such as damage to the paint system or protective coating, or the use of cleaning products by occupants that have accumulated in the recesses around the base of the door jambs.

430. I am not able to conclude that Mr Cass’s opinion should be preferred to that of Mr Abbott. Therefore, I am not prepared to conclude that such rusting as has been observed is the result of any defective construction of the bathrooms.

Damage to concealed spaces - vanities

436. There is evidence that there has been damage to concealed spaces under vanities and baths. However, Mr Cass and Mr Abbott disagreed as to the extent of that damage.

437. Mr Cass gave evidence that the waterproofing of the bathrooms was completed before installation of the vanities and baths, and that there are no water stops installed at the threshold of the vanities. As a result, Mr Cass opined that moisture would be able to travel into those areas unimpaired by membrane or water stops.

438. Mr Cass said that the only investigative method that would provide total certainty as to the location and extent of damage to concealed spaces was destructive testing; that is, removal of tiles and lining boards with the costs and dislocation that would result.

439. Brookfield submitted, and the Owners Corporation did not dispute, that the evidence as to actual observation of water in concealed spaces was confined to a total of nine vanities in six bathrooms.

440. Mr Cass hypothesised that in fact there was concealed area damage in 45 per cent of all bathrooms in Beau Monde on the following basis:

1. he had found that 125 of the 167 bathrooms he tested (some 75 per cent) produced medium or high moisture readings on his protimeter in the vicinity of concealed spaces;

2. borescope investigation of 15 vanities showed that nine (60 per cent) had medium or high moisture readings; and

3. it was therefore likely that at least 45 per cent of all bathrooms (60 per cent of 75 per cent) have water or moisture in concealed spaces.

441. This reasoning contains a number of assumptions.

442. The first is that the protimeter was a reliable guide to reach the conclusion set out at [440(a)] above, namely that there was a “medium” or “high” moisture level present in 125 bathrooms.

443. As I have mentioned, Mr Cass agreed that the protimeter was an “indicative tool” and not a precise means to measure moisture.

444. I had this exchange with Mr Cass during the concurrent evidence:

“Q:   I should read should I your characterisation of readings as being high, medium, low as being no more than there’s more moisture in the areas you’ve called high than in the area you’ve called low?

A:   Correct, thank you yes.”

445. Second, Mr Cass’s reasoning assumes that there was a direct correlation between his protimeter moisture readings and the presence of significant moisture in the vanities, and some sort of correlation between his protimeter moisture readings and the result of the borescope investigations of 15 vanities.

446. In that regard, this exchange occurred between Mr Cass and Mr Ashhurst during concurrent evidence:

“Q.    Have you assumed a direct correlation between your moisture meter readings and the presence of moisture, of significant moisture in the concealed spaces?

A:    Yes, I have.

Q:    Notwithstanding the fact that 100% of the high moisture meter readings you took did not relate or produce 100% borescope significant moisture in concealed space?

A:    That's right.

Q:    If it's possible that one high moisture meter reading doesn't produce the presence of water in significant amount when viewed through a borescope, then it must also be possible that the next example of a high moisture reading may also not produce the presence of significant water when viewed through a borescope?

A:    Yes.

Q:    Then it must be equally possible that the next one after that won't either?

A:    Yes.

...

Q.   Mr Cass, if you carried out one, just one, high moisture reading test, one borescope test and found no significant presence of water, would you say that's 100% correlation, that wherever there is high moisture reading, there is no significant presence of water?

A:    That's correct, you're correct.

Q:   Then why, as someone who is not qualified in statistical analysis, do you say that your 15 proves some form of direct correlation?

A:    You can't.”

447. The problem identified with the vanities was that the kickboards had become swollen and would rot if in constant contact with water in concealed spaces, and thus need to be replaced.

448. In so far as the observational evidence has established that water penetrated the vanities and caused the kickboards to become swollen, Mr Cass’s evidence as to the absence of water stops leads me to conclude that Brookfield is liable to rectify the defect.

449. It is common ground that rectification would require the removal and replacement of any swollen kickboards.

450. Brookfield accepts that, based on the observational evidence, some nine vanities require rectification at an estimated cost of between $320 and $340 per vanity (being the figure referred to at [402] above).

451. I am not prepared to find, based on what I regard as Mr Cass’s thought reasoning, that any systemic problem has been established such as would warrant Brookfield paying any further amount.

Damage to adjoining rooms

452. Mr Cass and Mr Abbott agreed that some rooms adjoining bathrooms at Beau Monde have water damage.

453. Fifteen apartments have been identified. All but two have been repaired.

454. Brookfield has accepted, on a without admission basis, that an award should be made to the Owners Corporation for the costs of rectifying the remaining two bathrooms using the method agreed to and recorded at Exhibit 27 (item 5). I understand that this is the amount of $16,798.18 referred to at [402] above.

Grout discolouration

455. Mr Cass and Mr Abbott agreed that there is grout discolouration in some bathrooms, but that it is not possible to quantify precisely the number of bathrooms where this occurs.

456. Mr Cass said that 107 of the 167 bathrooms he inspected had a “medium” or “high” moisture reading or exhibited grout discolouration (or “efflorescence”).

457. Mr Cass said that the grout discolouration is likely caused by moisture regularly escaping from the shower enclosure due to faulty stop angles.

458. However, the experts agreed that grout discolouration could also be caused by cleaning chemicals, lack of maintenance, water falling onto tiles as a result of ingress or egress to the shower, or some other cause.

459. Mr Cass gave this evidence in response to questions from Mr Ashhurst:

“Q:    Mr Cass, what possible basis could you have as to whether or not the efflorescence was caused by poor maintenance or by some other cause? That's a guess on your part, isn't it? You weren't there to see how often the bathrooms were maintained?

A:    I can see the state they were in when I went in but, yeah, it, the, the basis of your question is…correct. If the room, if the room hadn't been very well cleaned or maintained then I presume that you could say that the calcium hydroxide might not have been wiped off. But the type of efflorescence that we have is, is just the white powder or it is this growth going over the surface of the tiles.

Q:    It's just speculation on your part based on how clean the tiles looked when you walked in the room?

A:    And if they've got efflorescence on them there's moisture underneath them; I know that.

Q:    But the correlation between how well the bathroom has been maintained over the last seven years is entirely speculative on your part based on what the tiles looked like when you walked into the room, correct?

A:    That's right.”

460. Based on this evidence, I am not able to conclude that the grout staining or efflorescence was caused by any defect in the construction of the building, as opposed to the manner in which the particular bathrooms have been maintained.

461. In those circumstances, I am not prepared to make any order about this aspect of the matter.

Fire services

462. In accordance with cl 145(1)(b) of the Environmental Planning and Assessment Regulation 2000 (NSW), the Beau Monde building was required to comply with the relevant requirements of the BCA as in force at the time the application for the construction certificate was made. BCA compliance can be achieved through “deemed-to-satisfy provisions” or through “alternative solutions” (or a combination of both), provided that the relevant performance requirements are satisfied. If a development does not satisfy the deemed-to-satisfy provisions in any respect, an alternative solution must be developed to address the relevant non-compliance.

463. Although the Owners Corporation originally claimed some $2.235 million for fire service defects, the amount of its claim as pressed at the hearing was $80,525. The ambit of the dispute was narrowed, I was informed, following expert conclave and associated discussions between the Owners Corporation’s fire expert, Mr Greg Murrow, and Brookfield’s fire expert, Mr Stephen Grubits.

464. There was, to some extent, an air of unreality about this aspect of the Owners Corporation’s claim.

465. The Beau Monde building received an occupation certificate nine years ago. It has not received any adverse works orders by the NSW Fire Brigade or local council in the time since the occupation certificate was granted.

466. Further, on 15 March 2005, the NSW Fire Brigade wrote to North Sydney Council stating that it had conducted an inspection of the premises on 15 March 2005. It concluded:

“Based on certification received and inspections of the building, it is considered that adequate provisions have been made for the preventing and extinguishing of fires, and the protection and saving of life and property in the case of fire in relation to Performance Requirements EP 2.2 under the provisions of the Building Code of Australia”.

467. The parties produced a schedule setting out the competing contentions of Mr Murrow and Mr Grubits in relation to the items which remained in dispute.

468. The parties prepared their final submissions in terms of the item numbers in that schedule. I shall do the same.

Partially disputed items

469. There were 14 defects which Brookfield’s expert, Mr Grubits, accepted existed, but in respect of which Brookfield did not accept responsibility.

470. The evidence before me in relation to these items involved little more than Mr Murrow and Mr Grubits expressing an opinion, based upon their inspection of the items in question, as to whether the problems had been caused by Brookfield during construction or resulted from a lack of maintenance or the like since construction.

471. The items in question were 3, 5, 13, 17, 39, 42, 296 to 299, 301, 303, 304, 309 and 314.

472. Items 3, 5, 13, 17 and 42 related to notices or signs which were either missing or inadequate, and to a missing handle on the door of a hydrant booster assembly. It seems to me very likely that these shortcomings are a result of lack of maintenance over the years since construction in 2005, rather than any shortcoming in construction. I am not prepared to conclude these matters are Brookfield’s responsibility.

473. Item 39 related to an incomplete concrete services shaft wall. Mr Murrow and Mr Grubits offered different opinions, based upon the appearance of the exposure, as to whether it was an original building problem or the result of subsequent demolition. I see no basis upon which to prefer Mr Murrow’s view to Mr Grubits’s. I am therefore not able to form any view about this matter and am not satisfied that the plaintiff has established that it was a defect in the original construction rather than in later renovations.

474. Items 296 to 299, 301, 303 and 304 relate to defects within one apartment, apartment 3501. The defects relate to missing fire collars or other fire stopping devices. Mr Murrow and Mr Grubits expressed differing views, based upon the current appearance of the items in question, as to whether they represented a defect in original construction rather than a problem that occurred during a later renovation.

475. I am persuaded by Mr Murrow’s evidence that items 298 and 299 appear a lot more likely to be original defects, rather than defects caused by later renovation. Item 298 involves three copper pipes which appear to have been at all times lagged over their entire length, and therefore not properly constructed. Item 299 relates to four copper pipes which appear not to have been properly “fire stopped” at the time of construction.

476. Otherwise, having considered each expert’s competing contentions, I am not able to say whether the remaining problems were the result of defective original construction rather than later renovation.

477. The remaining items, items 309 and 314, occurred in apartment 3502. These items also involved the absence of fire collars or fire stopping devices. Again, I am not able to say, based upon the competing contentions of the experts, whether these problems were ones arising from original construction or later renovation.

478. Accordingly, so far as concerns the partially disputed items, the Owners Corporation succeeds only in relation to items 298 and 299.

Wholly disputed items

Location of hydrant relay pump room on level 17 (item 6)

479. Clause E1.3(b)(iv) of the BCA requires that a “fixed on-site pump set” must have direct access to a road or an “open space”. An “open space” includes a fire stair.

480. Mr Murrow and Mr Grubits agreed that the hydrant relay pump room on level 17 does not have direct access to an “open space” (i.e. a fire stair). This is because it opens onto a public corridor, rather than directly onto a fire stair.

481. The matter which divided the experts was whether the hydrant relay pump on level 17 is a “fixed on-site pump set” for the purposes of the relevant part of the BCA.

482. Mr Grubits contended that the hydrant relay pump on level 17 was not a “fixed on-site pump set”, as it was a booster pump rather than a pump at ground level. The function of a relay pump is to boost pressure part way up the building so that there is sufficient pressure on the higher floors of the building. Mr Grubits stated that it can therefore never be located at ground level.

483. I am not able to determine from this that the relay pump is not a “fixed on-site pump set”.

484. In any event, both experts agree that the matter can be rectified by way of an alternate solution that involves adding two signs to the building at a cost of approximately $500. I propose to order that Brookfield attend to this.

Ventilation of pump and sprinkler valves rooms (items 7 and 23)

485. BCA cl F4.5 requires that a room “occupied by a person for any purpose” must be ventilated.

486. Both the hydrant relay pump room on level 17 and the sprinkler valves room on level 8 are not ventilated.

487. The matter for consideration is whether rooms are “occupied by a person for any purpose”.

488. These two rooms are “occupied” from time to time, in the sense that people sometimes come and go from the room.

489. Mr Murrow drew attention to a publication called “Glossary of Building Terms”, which states that “occupied space” is “any space within a building in which a person will be present from time to time during the intended use of the building”.

490. Although Mr Murrow said that this document was an industry recognised document for definitions not incorporated in the BCA, he did not draw attention to any authority or regulation to that effect.

491. However, it appears to me to be likely that the intention of the relevant clause of the BCA was to provide that there be ventilation in a room in which someone might be present, otherwise than fleetingly, to carry out work or to perform inspections. It also seems likely that occasions might arise when trades people or inspectors would need to be present in both the hydrant relay pump room and the sprinkler valves room for either of these reasons, and that those rooms would be “occupied” during such activity.

492. Accordingly, my conclusion is that both these rooms should be ventilated. The Owners Corporation contends that the cost of installing such ventilation would be $5,000 for the hydrant pump room and $1,750 for the sprinkler valves room, although my attention has not yet been drawn to any evidence in support of that proposition.

Level 37 pump room exits (item 9)

493. Clause D1.2(f) of the BCA requires pump rooms to have two exits. It is common ground that the level 37 pump room has only one exit.

494. Trevor R Howse & Associates Pty Ltd have produced two alternative solution reports in relation to the level 37 pump room. It is common ground that the requirements of the second of those reports are met, but the requirements of the first report are not.

495. The Owners Corporation contends that there is no evidence that the second Howse report was ever recognised by any authority as sufficient compliance.

496. However, an occupation certificate has been issued for the property. There is no evidence of any works order made against the Owners Corporation in respect of the plant room. That suggests to me that the second Howse report has been recognised by the appropriate authority as sufficient compliance. Further, as Brookfield submits, the existence of the second Howse report establishes that if a works order ever was served on the Owners Corporation, an alternative solution such as the second Howse report would be considered adequate.

497. In those circumstances, I do not consider that the Owners Corporation has established any entitlement in respect of this item.

Balustrades (item 18)

498. Clause D2.16 of the BCA requires that the bottom rail of balustrades in fire stairs be not more than 150mm above stair nosings.

499. Mr Murrow and Mr Grubits agreed that the balustrades on the west and east fire isolated exits from level 8 to the street do not comply with this requirement.

500. These fire stairs are in a part of the building which was in existence prior to the Contract. The area did not form part of any of the scope of works performed by Brookfield under the Contract.

501. Thus, it appears that Brookfield cannot be responsible for the current state of the balustrades. Mr Murrow was not able to say whether, during construction under the Contract, there was a requirement that the balustrades be upgraded.

502. I am not persuaded that Brookfield is responsible for this shortcoming.

No sprinkler in lift room (item 20)

503. There are no sprinklers in the level 37 lift motor room.

504. Clause E1.5 of the BCA requires that a lift motor room be fitted with a “sprinkler system” that complies with AS 2118. That standard requires that a lift motor room be fitted with a sprinkler unless the equipment in the motor room is “dry electrical equipment (non-oil filled)”.

505. The question is whether the Owners Corporation has shown that the lift motor in the level 37 lift motor room does not fall within this exception.

506. I understood it to be common ground that the lift motor is itself “dry electrical equipment”.

507. There is no direct evidence as to whether the lift motor is “non-oil filled” or not. Mr Murrow said that a lift mechanic told him that the lift motor had a gear box holding some 3L of oil and that an allied rope compressor contained 0.5L of oil.

508. The Owners Corporation adduced no expert evidence to say whether, assuming that what Mr Murrow was told was correct, the result would be that the lift motor was “non-oil filled” for the purposes of AS 2118.

509. I am not satisfied that the Owners Corporation has made out this aspect of its case.

Mimic/call panel (items 27 and 28)

510. Clause E2.2a requires that a mimic panel and manual call point “should be installed in a clearly visible and readily accessible location inside the main entrance area of the building”.

511. The mimic panel and manual call point at Beau Monde are installed at the entrance to the car park on Spring Street, which is at the rear of the building.

512. Mr Grubits contended that the Spring Street entrance might be regarded by the NSW Fire Brigade as being the “main entrance area” to the building.

510. I do not agree. It is obvious that the “main entrance area” to the building is the entrance facing Berry Street.

511. The mimic panel and manual call point must be relocated.

512. As I understand it, the parties are otherwise agreed as to all outstanding fire services work and what alternative solutions are required to ensure that Beau Monde is relevantly compliant.

General internal defects

516. Brookfield has conceded an obligation to compensate the Owners Corporation in the sum $38,554.31 in respect of general internal defects.

517. These defects comprise such matters as:

1. cracking in plaster board greater than 1mm in width;

2. corrosion to sprinkler escutcheon covers;

3. inadequate wall joint sealant installation between facade precast wall panels;

4. plasterboard peaking with localised instances of “popping fixings”; and

5. skirting board separation.

518. The Owners Corporation did not develop any detailed submissions in respect of these matters, which were summarised by Mr Joannides in his 3 April 2013 report.

519. Brookfield submitted that, in respect of the items identified by Mr Joannides:

1. one item (an allegedly corroded escutcheon) has been duplicated;

2. three items are located on level 36, which was the subject of refurbishment works undertaken after Brookfield completed its works;

3. 39 items are the same issue in different areas, being alleged corroded escutcheon plates to the sprinkler heads, which Mr Karsai said (and I accept) was the result of a lack of maintenance; and

4. the remaining 48 items concern cracking or damage to plasterboard lining or associated skirting boards, only 24 of which were in the common property (that is, in inter-tenancy walls).

520. In those circumstances, Brookfield submitted that the Owners Corporation had only established an entitlement to damages in respect of those 24 items (being the figure of $38,554.31 referred to above).

521. Brookfield submitted that there was no basis to conclude that any of the general internal building defects were systemic.

522. The Owners Corporation’s submissions did not engage with these details. It did not refer to this aspect of the matter in its reply closing submissions.

523. In those circumstances, I accept Brookfield’s position.

The “urgent works”

524. The plaintiff arranged for repairs to be effected to the facade and some bathrooms in 2012 and 2013, undertaken by Remedial Building Services Australia Pty Ltd. Mr Christopher Jakovljevic, a manager at Remedial Building Services, gave evidence before me.

525. The Owners Corporation did not address any submissions as to whether, and if so, to what extent Brookfield should pay for the cost of those urgent works.

526. However, in its submissions, Brookfield drew attention to the work that Mr Jakovljevic said that Remedial Building Services carried out, and the cost of that work. Brookfield stated that, without admission of liability, it was prepared to pay $320,870 (being the figure referred to at [12] above) assuming that the Owners Corporation is registered for GST, and $352,957 if it is not.

527. In those circumstances, I am not prepared to conclude that the Owners Corporation has any greater entitlement in respect of this aspect of the matter.

Conclusion

528. I invite the parties to confer and agree as to the consequences of my findings, and the steps that should now be taken to resolve issues not otherwise dealt with.

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Decision last updated: 16 December 2015