The Owners - Strata Plan No 93543 v Zhang (No 3)

[2025] NSWSC 571

Supreme Court

New South Wales

Medium Neutral Citation:

The Owners – Strata Plan No 93543 v Zhang (No 3) [2025] NSWSC 571

Hearing dates:

22 to 25 March 2021, 2, 3, and 10 June 2021; 15 and 27 May 2025; further written submissions 28 May 2025 and 2 June 2025

Decision date:

04 June 2025

Jurisdiction:

Equity - Technology and Construction List

Before:

Stevenson J

Decision:

Plaintiff entitled to rescind Deed of Settlement; plaintiff commenced proceedings within the warranty period; plaintiff entitled to damages for defective works within the common property

Catchwords:

BUILDING AND CONSTRUCTION – Home Building Act 1989 (NSW) – statutory warranty – proceedings for breach – whether proceedings were commenced by plaintiff owners corporation within the warranty period – whether effect of interim occupation certificate was to cause warranty period to commence – whether interim occupation certificate authorised “the occupation and use of the whole of the building” – whether the two blocks of units should be seen as “separate buildings” that have separate completion dates

ESTOPPEL – promissory estoppel – where parties entered into deed of settlement containing a term allowing plaintiff owners corporation to rescind the deed in particular circumstances – whether plaintiff owners corporation estopped from rescinding deed – alleged representation by conduct inconsistent with express right of rescission – where defendant builder already in breach of contract and exposed to rescission before alleged representation made – no detrimental reliance established

LAND LAW – strata title – owners corporation – whether owners corporation has standing to seek compensation for building defects within strata lots – no standing established

Legislation Cited:

Civil Procedure Act 2005 (NSW)

Environmental Planning and Assessment Act 1979 (NSW)

Home Building Act 1989 (NSW)

Strata Schemes Management Act 2015 (NSW)

Cases Cited:

Dyldam Developments Pty Ltd v The Owners – Strata Plan 85305 [2020] NSWCA 327

Dyldam Developments Pty Ltd v The Owners – Strata Plan No 85305 [2019] NSWCATAP 229

Kramer v Stone [2024] HCA 48

Kramer v Stone (2023) 112 NSWLR 564; [2023] NSWCA 270

Rose v Manno Kingsway Pty Ltd as trustee for the Manno Kingsway Unit Trust [2025] NSWCA 23

Sidhu v Van Dyke (2014) 251 CLR 505; [2014] HCA 19

The Owners – Strata Plan 89023 v AT Building Pty Ltd [2018] NSWCATCD 33

The Owners – Strata Plan No 87265 v Saaib; The Owners – Strata Plan No 87265 v Alexandrova [2021] NSWSC 150

The Owners – Strata Plan No 87265 v Saaib; Alexandrova v The Owners – Strata Plan No 87265 [2022] NSWCA 63

Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387; [1988] HCA 7

Texts Cited:

P Keane, Estoppel by Conduct and Election (3rd ed, 2023, Sweet & Maxwell)

Category:

Principal judgment

Parties:

The Owners – Strata Plan No 93543 (Plaintiff)
Hui Zhang (Defendant)

Representation:

Counsel:
A G Rogers (22-25 March, 2-3, 10 June 2021 and 15 May 2025) and D S Allen (27 May 2025) (Plaintiff)
P Moorhouse / J Tsang (22-25 March, 2-3, 10 June 2021) and M Klooster (15 and 27 May 2025) (Defendant)

Solicitors:
Alexander Richards Lawyers (Plaintiff)
MPM Legal (Defendant)

File Number(s):

2018/382960

JUDGMENT

1. The plaintiff (the “Owners Corporation”) is the owners corporation in respect of a 20-unit development in Hughes Street, Cabramatta.

2. The development comprises two four storey residential apartment buildings constructed over a basement carpark.

3. The front building facing Hughes Street (“Block A”) comprises units 1 to 10. The rear building (“Block B”) comprises units 11 to 20. Block A is built over an underground carpark, accessible by a lift situated on the ground level of Block A and stairs accessible from a courtyard between Blocks A and B. Each of the 20 units include a car space in the carpark. There is a common pedestrian accessway to each of Blocks A and B. The accessway, together with a courtyard and planter box, lies between the two blocks. These matters are depicted on the attached “Location Plan”. Location Plan (742 KB, pdf)

4. The defendant, Mr Zhang, previously owned the site on which the development has been constructed. He was the developer. He retains two units.

5. The builder was ZH International Pty Ltd, now in liquidation. Mr Zhang was a director and shareholder of that company.

6. The Owners Corporation alleges that there are defects in the common property, and also in some of the units. I will return to the standing of the Owners Corporation to bring these proceedings in relation to damage other than in the common property. ^[1]

   1. At [86] below.

7. Mr Zhang accepts that the Owners Corporation has the benefit of the statutory warranties under the Home Building Act 1989 (NSW) (the “HBA”) on the basis that he was a “developer” for the purposes of s 3A of the HBA and that the Owners Corporation is his successor in title in respect of the common property.

8. An Interim Occupation Certificate was issued on 13 May 2016. This certificate was expressed to exclude Units 1 and 10 and “external works”.

9. The strata plan was registered on 17 June 2016.

10. A Final Occupation Certificate for the whole development was issued on 4 July 2016.

11. These proceedings were commenced on 24 May 2018: within 2 years of the Final Occupation Certificate, but not within 2 years of the Interim Occupation Certificate.

12. I heard these proceedings over six days in March and June of 2021. During that period, I had a view of the property. I received closing written submissions on liability issues during May 2021.

13. On 10 June 2021, at the conclusion of the expert evidence, I adjourned the matter to 21 July 2021 for final submissions, including as to defects.

14. The proceedings were then stood over, without proceeding to submissions, to enable a mediation and settlement discussions to take place. The matter was listed for mention before me from time to time between then and now.

15. On 26 March 2025, I was informed by the parties’ legal representatives that the parties had entered a settlement deed (“the Deed”) to settle the proceedings, and that it was a term of the Deed that the Owners Corporation could rescind the Deed in particular circumstances.

16. Against the possibility that the Deed might be rescinded, I was asked to reserve 15 May 2025 for final submissions. I informed the parties of my impending retirement from the Court, that my last sitting day was to be 13 June 2025, and that, if the matter did require my further consideration, it would have to be within that time frame.

17. I directed the parties to exchange and provide to my Associate any further submissions by 9 May 2025. As I had received no submissions as to defects in 2021, it must have been clear to the parties that these further submissions would have to address defects, including the extent to which the defects complained of affected the common property of the development, as opposed to the property of particular lot owners.

18. In accordance with my earlier directions, albeit slightly late, the Owners Corporation served its final submissions in relation to the alleged defects on 12 and 14 May 2025.

19. Having received no submissions from Mr Zhang, I restored the matter to the list on 14 May 2025. On that occasion I was informed by Mr Zhang’s solicitor that Mr Zhang would not be in a position to present submissions as to defects, evidently because counsel to appear on 15 May 2025, different counsel than had appeared in 2021, had not then formally been retained.

20. I was also informed, for the first time, that on 22 April 2025 the Owners Corporation had purported to rescind the Deed, and that Mr Zhang disputed that such recission was effective.

21. I directed Mr Zhang to make any application about that matter by 4pm on 14 May 2025 with such application to be returnable before me on 15 May 2025.

22. Later that day, Mr Zhang filed a Notice of Motion seeking, in effect, a declaration under s 73 of the Civil Procedure Act 2005 (NSW) that the Deed remained binding and enforceable.

23. Early on 15 May 2025, in support of the motion, Mr Zhang served a lengthy affidavit by his solicitor and submissions from Mr Klooster, by then retained to appear. As Mr Rogers, who appeared for the Owners Corporation, was not then able to deal with those matters, I fixed Mr Zhang’s motion for hearing before me on 27 May 2025.

24. Nevertheless, the parties agreed that I should hear final submissions on the liability issues on 15 May 2025 and reserve my decision pending determination of Mr Zhang’s motion. That matter proceeded accordingly.

25. As Mr Zhang was not in a position to deal with the defects questions on 15 May 2025, and as that was entirely the consequence of his failure, or at least that of his lawyers, to be ready for the hearing, I have informed the parties that I propose to refer the questions of the existence of defects, the costs of rectification of the defects and the question of whether the defects are on the common property out to a referee. This will be on the basis that Mr Zhang pays the costs of the reference, including that of the referee, in any event.

Did the Owners Corporation effectively rescind the Deed?

26. On 27 May 2025, I found that the Owners Corporation effectively rescinded the Deed and dismissed Mr Zhang’s motion. ^[2] I said I would give my reasons in this judgment.

    2. I also dismissed a First Cross-Claim Cross-Summons filed in Court on that day seeking the same relief as sought in the motion.

27. Mr Zhang contended that, in the events that had happened, the Owners Corporation was estopped from relying on its right of rescission under the Deed and was obliged to afford him more time to perform his obligations under the Deed.

The Deed

28. The Deed was executed on 2 May 2023. It was the product of an in principle agreement reached at a mediation before Mr Michael McHugh AC KC on 22 May 2022. The terms of the settlement, which were negotiated over the following year, included for Mr Zhang to perform further rectification work.

29. To that end, cl 2.2 required Mr Zhang, within three months from the date of the Deed, to enter a contract as agent for the Owners Corporation with a builder, nominated in the first instance as being Crown Home (NSW) Pty Ltd, to perform specified rectification work.

30. Clause 2.2A provided:

“In the event that no such contract as described in paragraph 2.2 hereof has been entered into within three (3) months of the date of this Deed [that is, by 3 August 2023], the Owners Corporation may rescind this Deed ab initio and proceed to seek judgment in [these proceedings].” (Emphasis added.)

Subsequent events

31. There is no dispute that Mr Zhang did not perform his obligations under the Deed by 3 August 2023.

32. Although that entitled the Owners Corporation to rescind on 3 August 2023, it did not then do so.

33. All subsequent communications were between the solicitors for the parties. I will refer simply to the parties.

34. It emerged that Crown Home’s building licence had to be “reinstated”. That occurred in October 2023. Mr Zhang proffered to the Owners Corporation a proposed building contract with Crown Home in November 2023. The Owners Corporation circulated a competing form of contract over seven months later, in June 2024. That contract nominated a director of Crown Home as a guarantor. There was a debate about that. In August 2024, Mr Zhang proffered a revised version without that guarantor.

35. On 23 September 2024, the Owners Corporation issued a Notice to Perform (the “First Notice to Perform”) requiring Mr Zhang to enter a contract as required by cl 2.2 of the Deed within 28 days. The notice provided:

“If You have not, within the said period of 28 days, entered into a contract as required by clause 2.2 of the Deed of Settlement, the Owners Corporation shall be entitled to exercise all rights with respect to the Deed of Settlement including the right to rescind the Deed of Settlement ab initio and proceed to seek judgment in the Supreme Court Proceedings and in this respect time is of the essence.”

36. That prompted Mr Zhang immediately to execute the contract.

37. But the Owners Corporation then discovered that Crown Home did not have the requisite Home Owners Warranty Insurance.

38. Correspondence ensued. Ultimately, on 25 November 2024, the Owners Corporation gave Mr Zhang until 20 January 2025 to comply with his obligations under the Deed and, if necessary, retain a different builder.

39. Mr Zhang did not respond within that time. Rather, on 3 February 2025, and for the first time, Mr Zhang informed the Owners Corporation that Crown Home had, on 21 January 2025, the day after the November 2024 deadline, applied for Home Warranty Insurance.

40. On 5 February 2025, the Owners Corporation issued a second Notice to Perform (the “Second Notice to Perform”) requiring performance within 14 days. It was in similar terms to the First Notice to Perform.

41. There was no response.

42. On 6 March 2025, the Owners Corporation issued a third Notice to Perform (the “Third Notice to Perform”) requiring performance within 42 days, in the same terms as the previous notices.

43. Again, there was no response, save that on 25 March 2025, Mr Zhang’s solicitor wrote to the Owners Corporation’s solicitor noting that the notice “does not expire to [sic] 17 April 2025”.

44. On 22 April 2025, the Owners Corporation served a Notice of Rescission.

45. Only then, on 29 April 2025, did Mr Zhang respond by informing the Owners Corporation, for the first time, that he had engaged another builder, Cornerstone Project Group Pty Ltd, to do the work.

Does a promissory estoppel arise?

46. Relying on the elements of an “equitable estoppel” identified by Brennan J in Waltons Stores (Interstate) Ltd v Maher,^[3] Mr Zhang contended that a promissory estoppel arose because: he assumed the Owners Corporation would “not rely on strict compliance with clause 2.2A”; the Owners Corporation induced, or acquiesced to, his adoption of that assumption; he acted in reliance on that assumption; the Owners Corporation knew or intended that he would so act; and his action or inaction will occasion detriment if the assumption is not fulfilled. Mr Zhang contended that the Owners Corporation was obliged to give him three months from the date the Second Notice to Perform was issued.

    3. (1988) 164 CLR 387 at 428-429; [1988] HCA 7.

47. There is no suggestion of any promise or representation by the Owners Corporation before the expiry of the 3 month deadline in the Deed on 3 August 2023 that it would not rely on its strict rights under cl 2.2A of the Deed.

48. Rather, Mr Zhang contended that the conduct of the Owners Corporation after 3 August 2023, and until service of the Second Notice to Perform was issued on 6 February 2025, led him to assume that the Owners Corporation “did not seek strict compliance with clause 2.2A”.

49. But the first element in Brennan J’s formulation, being an assumption as to the existence of a particular legal relationship, does not need to be established for a promissory estoppel to be made out. Rather, there must be “a ‘clear and unequivocal’ promise … made by the party estopped to the party who relied upon the promise”. ^[4] A representation or promise may derive from conduct, provided it is sufficiently clear. ^[5]

    4. Rose v Manno Kingsway Pty Ltd as trustee for the Manno Kingsway Unit Trust [2025] NSWCA 23 at [79] (Bell CJ, Mitchelmore and Adamson JJA agreeing), citing Kramer v Stone [2024] HCA 48 at [37] (Gageler CJ, Gordon, Edelman and Beech-Jones JJ).

    5. Kramer v Stone (2023) 112 NSWLR 564 at 582-3; [2023] NSWCA 270 at [84]-[86] (Ward P, Leeming and Kirk JJA agreeing).

50. It is true that the conduct of the Owners Corporation after 2 August 2023, and until even after the First Notice to Perform, was inconsistent with its right of rescission under cl 2.2A and evinced a clear preference for performance.

51. But the only representation that could arise, inferentially, from that conduct was that the Owners Corporation would not rescind without giving Mr Zhang reasonable notice.

52. On 6 March 2025, the Owners Corporation gave Mr Zhang 42 days, that is 6 weeks, notice to perform or face recission of the Deed. In the events that had happened, that was reasonable notice. Mr Zhang did not, during those 42 days, contend that it was not. Indeed, he said nothing during that period.

53. In any event, no promissory estoppel arises because there was no reliance by Mr Zhang on that representation to his detriment.

54. Reliance and detriment are for Mr Zhang to establish; they are not presumed. ^[6] It was necessary for Mr Zhang to establish that he “would have acted differently” but for his assumption; ^[7] and that he had suffered or would suffer detriment if the Owners Corporation was permitted to resile from its representation by conduct.

    6. Ibid at [91], [95] (Ward P, Leeming and Kirk JJA agreeing).

    7. Ibid at [92] (Ward P, Leeming and Kirk JJA agreeing), citing Sidhu v Van Dyke (2014) 251 CLR 505 at 532ff; [2014] HCA 19 at [90]ff (Gageler J, as the Chief Justice then was).

55. Mr Klooster, who appeared on this application for Mr Zhang, could not point to any such detriment. Mr Zhang gave no evidence of it: indeed, he gave no evidence at all.

56. Having failed to enter a contract by 2 August 2023, Mr Zhang was already in breach of his obligations under the Deed and exposed to rescission under cl 2.2A. Although he took some steps towards performance, he remained at all times in breach of his obligations under the Deed until the Notice of Rescission was issued.

57. Promissory estoppel normally causes a temporary change in the rights of the parties; the promisor can revert to their strict rights once the promisee has been restored to their former position. ^[8] There was no change in Mr Zhang’s rights here: he was consistently in breach of his obligations under the Deed and consistently exposed to rescission.

    8. P Keane, Estoppel by Conduct and Election (3rd ed, 2023, Sweet & Maxwell) at [13-022].

58. Having reached this conclusion, there is no need for me to deal with the submissions made by Mr Allen for the Owners Corporation as to the efficacy of the Third Notice to Perform: a matter which was not raised by Mr Zhang in support of his motion.

59. My conclusion was that the Owners Corporation was entitled to rescind the Deed.

Limitation

60. Returning to the main case, Mr Zhang contended that, in relation to defects in Block B that were not “major” defects for the purposes of the HBA, the proceedings were commenced beyond the expiry of the “warranty period” under the HBA.

The statutory provisions

61. Proceedings seeking to invoke the statutory warranties under the HBA must be commenced “before the end of the warranty period for the breach”. ^[9]

    9. HBA, s 18E(1)(a).

62. The “warranty period” is six years “for a breach that results in a major defect in the residential building work” and two years in “any other case”. ^[10]

    10. HBA, s 18E(1)(b).

63. A “major defect” is, relevantly, a defect in a “major element” of the building that is likely to cause the inability to inhabit or use the building, or the destruction or threat of collapse of any part of the building. ^[11]

    11. HBA, s 18E(4)(a).

64. The warranty period starts, relevantly, “on completion of the work to which it relates …”. ^[12]

    12. HBA, s 18E(1)(c).

65. In relation to the “construction of a new building in a strata scheme”, the position here, the date of “completion of the work” is to be determined in accordance with s 3C of the HBA, and occurs on “the date of issue of an occupation certificate that authorises the occupation and use of the whole of the building …”. ^[13]

    13. HBA, s 3C(2).

66. Where the work comprises the “construction of 2 or more separate buildings”:

“… the date of completion of that work is to be determined as if there were a separate contract for each separate building … so that the work for each building will have a separate completion date.” ^[14]

14. HBA, s 3C(3).

67. For this purpose, a building is “separate” if “it is reasonably capable of being used and occupied separately from any other building”. ^[15]

    15. Ibid.

Two separate “buildings”?

68. There is a dispute as to whether Blocks A and B should be seen as being two separate buildings, such that they might have different completion dates for the purposes of the provision referred to at [64] above, and thus separate dates from which the statutory warranty period would commence.

69. The configuration of Blocks A and B is set out at [3] above and on the attached “Location Plan”.

70. A “building” is:

“… any structure that, as a new building, requires the issue of an occupation certificate to authorise its use and occupation”. ^[16]

16. HBA, s 3C(5).

71. Obviously, Blocks A and B could not be occupied without an occupation certificate.

72. But I do not see them as comprising separate “structures” such that they would have separate completion dates, ^[17] and thus separate dates from which the statutory “warranty period” would commence.

    17. For the purposes of s 3C(3) of the HBA.

73. I do not see how Block A could be used or occupied separately from Block B. First, Block B comprises units 11 to 20; these are clearly related to units 1 to 10 in Block A. Second, the underground carpark comprises car spaces for each of the 20 units, but the car park is accessible by lift only from Block A, or from the courtyard situated between Blocks A and B. The whole use of Block B depends upon the use of Block A.

74. I agree with Mr Rogers that the structure is one edifice identified in the relevant floor plans. Blocks A and B form separate towers but do so as part of the same structure.

The 13 May 2016 Interim Occupation Certificates

75. Two Interim Occupation Certificates are in evidence, both signed by the Principal Certifying Authority, Mr Shanmugananthan.

76. One was annexed to an affidavit of Mr Zhang and was expressed to be in respect of “Whole [building work] – Excluding Unit 1”.

77. The other, produced in response to a subpoena directed to the local Council, was expressed to be in respect of “Whole [building work] - Excluding Unit 1 & 10 and external works”.

78. As the latter was produced from the Council’s records, it is more likely to be the authoritative version. It excluded units 1 and 10. Both those units are in Block A. It also excluded “external works”. It did not identify those external works. There is no evidence by reference which such works can be identified. On the face of it, the certificate excluded all external works: including the roof and façade of both Blocks A and B, pedestrian accessways, and the like. There is no evidence to the contrary.

79. As I have said, the warranty periods under the HBA commence “on completion of the work”, ^[18] which in the case of the construction of a new building in a strata scheme is “the date of issue of an occupation certificate that authorises the occupation and use of the whole of the building”. ^[19]

    18. HBA, s 18E(1)(c).

    19. HBA, s 3C(2), emphasis added.

80. An “interim occupation certificate” is one that “authorises a person to commence occupation or use of a partially completed new building”. ^[20]

    20. Under the former s 109H(1)(a) of the Environmental Planning and Assessment Act 1979 (NSW) (“EPA Act”).

81. As the Interim Occupation Certificate excluded units 1 and 10, it did not authorise use and occupation of Block A. As it also excluded external works, which I take to be all external works, it did not authorise occupation of either Blocks A or B.

82. In any event, as I have concluded that Block A is not a separate building to Block B, there was on 13 May 2016 only one, partially completed, building. The Interim Occupation certificate did not authorise the occupation and use of the “whole” of that one building. ^[21]

    21. Cf The Owners – Strata Plan 89023 v AT Building Pty Ltd [2018] NSWCATCD 33, where the interim occupation certificate appeared to purport to authorise the occupation and use of whole of the building; cf Dyldam Developments Pty Ltd v The Owners – Strata Plan 85305 [2020] NSWCA 327, and the earlier decision of the Appeal Panel in Dyldam Developments Pty Ltd v The Owners – Strata Plan No 85305 [2019] NSWCATAP 229, where the interim occupation certificate had not been validly issued pursuant to s 109H(2) of the EPA Act, and therefore could not be an occupation certificate for the purposes of s 3C(2) of the HBA.

83. If, contrary to my conclusion, Block B is a separate building to Block A, the effect of the 13 May 2016 certificate was not to authorise its occupation and use. An Interim Occupation Certificate only authorises a person to commence occupation or use of a “partially completed new building”. ^[22] Block B, if it was a separate building, was not “partially completed”; it was completed. An Interim Occupation Certificate was not capable of authorising its occupation and use. Only a final occupation certificate could achieve that result. ^[23]

    22. See [80] above; under the former s 109H(1)(a) of the EPA Act.

    23. See Dyldam Developments Pty Ltd v The Owners – Strata Plan 85305 (supra) at [91] (White JA, Simpson AJA agreeing), where the interim occupation certificate was express on its face, and could not be a final occupation certificate.

84. Either way, the Interim Occupation Certificate did not operate so as cause the warranty period under s 18E of the HBA to start to run, at least in relation to Block B. Thus, the limitation period for the statutory warranties did not commence on 13 May 2016.

85. That period for both Blocks and B commenced to run on the issue of the Final Occupation Certificate on 4 July 2016. The proceedings were commenced within 2 years of that date. They were thus commenced within the warranty period.

Can the Owners Corporation bring proceedings for defective work other than in the common property?

86. Section 254 of the Strata Schemes Management Act 2015 (NSW) (the “SSMA”) authorises an owners corporation to commence proceedings in respect of common property.

87. Mr Rogers relied on s 9(2)(b) of the SSMA that provides that:

“(2) The owners corporation has, for the benefit of the owners of lots in the strata scheme—

(a) the management and control of the use of the common property of the strata scheme, and

(b) the administration of the strata scheme.”

88. Mr Rogers submitted that the “administration of a strata scheme necessarily includes acting in the interests of the individual lot owners” and that “there is no reason to read the words of the section down so as to exclude an action in respect of the rights of individual lot owners”.

89. Mr Rogers did not point to any authority in support of that submission. ^[24] I do not accept it.

    24. Indeed, in The Owners – Strata Plan No 87265 v Saaib; The Owners – Strata Plan No 87265 v Alexandrova [2021] NSWSC 150, Henry J recorded that it was common ground that the owners corporation could not sue for defects not relating to common property, see [385], and her Honour proceeded accordingly, see [396], [402]. Her Honour’s decision was overturned on appeal, but not on that point; see The Owners – Strata Plan No 87265 v Saaib; Alexandrova v The Owners – Strata Plan No 87265 [2022] NSWCA 63.

90. As its words make clear, s 9(2) of the SSMA is concerned with the management, control and administration of “the strata scheme”. I cannot see how the section can be construed as entitling an owners corporation to act as agent or otherwise on behalf of individual owners in relation to claims arising in relation to individual lot property.

91. After the close of submissions, I invited submissions from the parties as to the effect of s 255 of the SSMA.

92. Section 255 provides:

“255 Structural defects—proceedings as agent

(1) An interested person may take proceedings for the rectification of the condition of a part of a building, or a part of the site of a building, if that condition affects or is likely to affect the support or shelter provided by that part to any other part of the building or its site.

(2) The proceedings may be taken only if—

(a) they could have been taken by an owner of a lot or by another person in whom is vested an estate in fee simple in a part of the building or its site, and

(b) they have not been taken by the owner or other person within a reasonable time.

(3) The proceedings are taken by an interested person as agent for the person who might have taken the proceedings and at the cost of the interested person.”

93. Section 255(4) defines an “interested person” to include an owners corporation.

94. The Owners Corporation submitted that there are two defects in the development that are likely to affect the support provided to other parts of the building: cracking to an internal wall, and the insufficient height of the balcony balustrades.

95. However, there is no evidence before me that the cracking or balcony balustrades comprise a condition that affects or is likely to affect “the support or shelter provided by that part to any other part of the building or its site”.

96. There is also no evidence addressing the question of whether or not the conditions precedent set forth in s 255(2) are engaged.

97. Accordingly, and because the Owners Corporation did not earlier rely on s 255, I do not propose to consider the matter further.

Remedy

98. There was also a dispute about whether Mr Zhang should be given an opportunity to seek to have the defects rectified, rather than to be visited with a monetary judgment.

99. In that regard, s 48MA of the HBA provides:

“A court or tribunal determining a building claim involving an allegation of defective residential building work by a party to the proceedings (the responsible party) … is to have regard to the principle that rectification of the defective work by the responsible party is the preferred outcome.”

100. The circumstances discussed above ^[25] make clear that Mr Zhang procuring rectification of the defects is not the “preferred outcome” in this case.

     25. See [28] to [45].

Interest

101. The Owners Corporation submits that once the question of the damages to which it is entitled is ascertained, it should have interest on that amount running from the commencement of proceedings.

102. However, the assessment that has been made by the parties’ experts as to the cost of rectifying the defects in the common property, together with such conclusion as the referee comes to on that question, will be relevant to the extent to which an order for interest would be appropriate.

103. That question can be reconsidered once the referee’s report is to hand.

Conclusion

104. For those reasons, my conclusions are that the Owners Corporation has brought these proceedings within the warranty period under the HBA and that it is entitled to damages for the defective works within the common property, but not otherwise.

105. For the reasons I have set out above, I propose to refer the balance of the proceedings out for inquiry and report.

106. The parties should confer and agree on the orders necessary to give effect to these reasons, including orders to facilitate the reference.

107. I will list the matter for directions shortly so that those orders can be made.

**********

Endnotes

Decision last updated: 04 June 2025