The Owners - Strata Plan No 95242 v Karimbla Properties (No 42) Pty Ltd

[2024] NSWSC 1625

Supreme Court

New South Wales

Medium Neutral Citation:	The Owners - Strata Plan No 95242 v Karimbla Properties (No 42) Pty Ltd [2024] NSWSC 1625
Hearing dates:	12 December 2024
Decision date:	12 December 2024
Jurisdiction:	Equity - Technology and Construction List
Before:	Stevenson J
Decision:	Plaintiff to be granted leave to adduce further expert evidence
Catchwords:	CIVIL PROCEDURE – where plaintiff has served expert evidence – where that expert evidence based upon inspection of some but not all units allegedly affected by defects – where plaintiff belatedly seeks leave to adduce expert evidence in respect of defects alleged to exist in remaining units
Category:	Procedural rulings
Parties:	The Owners - Strata Plan No 95242 (Plaintiff) Karimbla Properties (No 42) Pty Limited (First Defendant) Karimbla Constructions Services (NSW) Pty Ltd (Second Defendant) Guardian Protection Services (Aust) Pty Ltd (Third Defendant) Plumb Group Pty Limited (Fourth Defendant) Saba Bros. Tiling Pty Ltd (Fifth Defendant)
Representation:	Counsel: F Corsaro SC (Plaintiff) G Sirtes SC (First and Second Defendants) Solicitors: Chambers Russell Lawyers (Plaintiff) Meriton Property Services Pty Ltd (First and Second Defendants) Katerina Mihail Solicitor (Third Defendant) Kydon Segal Lawyers (Fourth Defendant) Meridian Legal (Fifth Defendant)
File Number(s):	2023/128827

EX TEMPORE JUDGMENT (REVISED)

1. This case represents an example of how proceedings in the Technology and Construction List should not be conducted.

2. The plaintiff is an Owners Corporation in relation to a large strata development in Zetland known as the “Symphony”. The development contains 223 units and common property.

3. These proceedings were commenced on 21 April 2023.

4. The first and second defendants are the developer and builder of the project. They are both members of the Meriton group. The third to fifth defendants are subcontractors for the builder.

5. Extraordinarily, although the proceedings have been on foot for 20 months, no orders have yet been made for any of the defendants to file a List Response.

6. Instead, multiple orders have been made for the service by the plaintiff of evidence and the proceedings have been stood over on a large number of occasions from Friday to Friday.

7. The Owners Corporation served its evidence in October and November 2023, being reports from general building, waterproofing, hydraulic, fire safety and structural experts.

8. Those reports related to the inspection by those experts of only some of the 223 units in the development. Three of the experts inspected approximately half of the units and the other expert inspected approximately a quarter of the units.

9. Nonetheless, in correspondence sent on 8 September 2023, a short time before the reports were served, the solicitors for the Owners Corporation proposed an adjournment “to finalise and concurrently serve all expert reports on the active defendants”. (Emphasis added.)

10. There was no hint then that the reports that the Owners Corporation then proposed to serve, and did subsequently serve, would be otherwise than all the evidence on which it would rely.

11. After service of the final report, being that of the Owners Corporation’s structural engineer, the solicitor for the Meriton parties, Ms McMillan, requested the Owners Corporation solicitors to prepare a Scott Schedule “for ease of both outlining the defects claimed by the plaintiff and for the defendants to respond to the plaintiff’s evidence, including to use the schedule in negotiations”.

12. On 29 November 2023, Ms McMillan wrote to the Owners Corporation’s solicitors asking, “When should we expect to receive your client’s Scott Schedule?”

13. The Owners Corporation’s solicitors replied on 4 December 2023:

“We note the orders do not require the filing of a Scott Schedule, noting the evidence is not finalised. Nonetheless, given your request below, we have commenced preparation of it. There are a number of reports to get through but hope to complete it within 2 weeks.”

14. The Owners Corporation’s solicitors’ statement in that email that “the evidence is not finalised” must have been a reference to the fact that the defendants’ evidence was not then served, as there was no suggestion in the correspondence at that time that the Owners Corporation was proposing to serve further evidence.

15. On 11 April 2024, Ms McMillan wrote to the Owners Corporation’s solicitors referring to discussions earlier that day and asked the Owners Corporation’s solicitors to confirm “if your client intends to serve further evidence-in-chief and, if so, when”, and asking “when will we obtain the Scott Schedule?”

16. The Owners Corporation’s solicitors replied on 17 April 2024:

“The Scott Schedule will be with you on Wednesday next week latest. We will revert to you, and the other parties, at the same time with our client’s position on the further evidence.”

17. On 24 April 2024, the Owners Corporation’s solicitors served on the solicitors for the defendants a Scott Schedule. The Scott Schedule is not before me, but I am told it is a detailed document that contains a reference to over 4000 defects.

18. The covering email said:

“We will return to the defendants over the coming week as to our client’s position in relation to the progression of the proceedings.”

19. On 7 May 2024, Ms McMillan, responding to a proposal as to orders to be made in these proceedings said, “[p]rior to agreeing to the proposed orders, my client requires confirmation that your client’s evidence-in-chief has been served in its entirety”.

20. The Owners Corporation’s solicitors replied later that day:

“We confirm that a formal position from our client, in respect of any additional inspections that it intends to undertake, including whether an early settlement discussion is possible (subject to the views of all parties) will be provided to the defendants no later than close of business on 7 June 2024.”

21. The Owners Corporation’s “formal position” was ultimately set forth in an email sent to the defendants on 14 June 2024.

22. That email annexed letters from each of the Owners Corporation’s four experts opining that the defects that each had identified in their 2023 reports were likely to be systemic and prevalent in the uninspected units.

23. The email also stated:

“As would be expected, our client needs to make a decision on what further evidence it obtains (with its experts having inspected only a sample of units).

…

From a cursory review of the correspondence, it appears to us that many of the deficiencies identified in the letters from Triaxial, Watermark and EBS could be resolved through a reasonable discussion between the parties as to the likelihood of those defects existing in other areas of the scheme, though it appears [to] us that the concerns raised in the RHM letter will require some more detailed and considered discussion between the parties.

Our client will need to make a decision on whether it procures this evidence (at significant cost) and prior to doing so seeks to ascertain the Defendants’ position to enter into early discussions on the basis of the presently identified defects particularised in the Scott Schedule and in the letters accompanying this email. We would anticipate that would first comprise the Defendants providing their response to the Scott Schedule and the letters, and we are happy to provide any further information necessary to facilitate that process.

Please let us know your client’s position.

This remains subject to our client’s final instructions.”

24. That email makes clear that the Owners Corporation’s solicitors and the Owners Corporation then understood the incomplete nature of the evidence it had served and that it would need to make a decision as to whether to supplement that evidence. It also shows that the Owners Corporation’s solicitors were entertaining a hope that discussions could take place, but that the whole question was “subject to our client’s final instructions”.

25. The next piece of correspondence before me is an email sent by the Owners Corporation’s solicitors to the other parties on 29 July 2024 proposing a further eight-week adjournment of the proceedings and stating that “we are still awaiting the responses from the Defendants in respect of the Plaintiff’s Scott Schedule, as well as the correspondence provided from our client’s experts”.

26. However, there is no evidence before me that the Owners Corporation’s solicitors were taking any steps to cause such discussions to take place. It does appear that the matter was left to drift.

27. On 23 September 2024, the Owners Corporation’s solicitors wrote to the parties:

“We are instructed that the owners corporation is in the process of resolving [its] preferred next steps in relation to the conduct of the proceedings and evidence in late October 2024. We anticipate receiving instructions to provide an update to all parties shortly thereafter, including further proposed orders for your respective clients’ consideration at that point.”

28. Again, a further eight-week adjournment was proposed with no suggestion of there being further steps taken to have further discussions.

29. On 16 October 2024, there was a general meeting of the Owners Corporation and a resolution was passed to “proceed with further expert determination”.

30. In his affidavit of 22 November 2024, the solicitor for the Owners Corporation, Mr Russell, states:

“The plaintiff has now engaged its experts to undertake a complete inspection of the strata scheme, being 100% of all units (223 units) and all common areas, and to prepare litigation compliant reports which record the outcome of those inspections.”

31. In those circumstances, the Owners Corporation now seeks the following orders:

“(a)    The plaintiff is to serve its supplemental expert liability evidence by 30 September 2025.

(b)    The defendants are to notify the plaintiff’s solicitors of the experts they propose to instruct within 14 days of these directions.

(c)    The plaintiff is to provide the defendants’ experts with notice of inspections and an opportunity to observe and participate in the investigative process by providing those experts at least 7 days’ notice of the investigations proposed.

(d)    The matter is listed for a further directions hearing on 3 October 2025.”

32. The reason why the Owners Corporation seeks until 30 September 2025 to serve its further evidence is set out in Mr Russell’s affidavit as follows:

“Based on CRL’s discussion with the experts, I am informed that the earliest time that each expert has mutual availability is at the beginning of February 2025.

RHM Consultants will require six (6) months to prepare and finalise their expert witness report based on the extent of the defects identified and the size of their strata scheme. This time frame has been taken into consideration when the plaintiff has sought a timetable for evidence from the defendants, Mr Poriters of RHM Consultants has already provided evidence based on a significant inspection project. He has many more units to inspect. I do not think it is realistically feasible for the owners corporation to obtain the evidence faster by engaging an alternative expert, and it seems neither just nor conducive to the orderly and efficient conduct of the proceedings for the owners corporation to rely on evidence from two different experts in the same discipline. It is also not guaranteed that another general and waterproofing expert could sufficiently prepare a litigation compliant report on an inspection of 223 lots could be completed at an earlier date.”

33. What is absent from the evidence before me is an explanation from the Owners Corporation as to why it was that a decision was taken to serve evidence over a year ago based on an inspection of between a quarter and a half of the units in the building, and why it is only now that the belated decision has been taken to seek to conduct a more wide-ranging investigation of the defects said to exist in the building.

34. What I have set out above shows how unsatisfactory the matter has proceeded.

35. I accept that, if as the Owners Corporation evidently fears, there are defects throughout the building of the same nature as are alleged to be present in the units that have been inspected, it has a serious case to advance against some or all of the defendants.

36. What the merits or otherwise of that case will be remains to be determined.

37. It appears that, at the time the Owners Corporation’s expert evidence was served over a year ago, those advising the Owners Corporation thought that it would be sufficient to serve expert reports based on inspection only of a proportion of the units of the building. That was a forensic choice that was then made by the Owners Corporation as advised by their legal representatives.

38. Although, as I have said, there is no evidence before me providing an explanation for this, there has evidently been a change of heart by those advising the Owners Corporation, and a decision made that the question of the defects in the uninspected units cannot be left as a matter of inference, but must be proven.

39. This is, to repeat, most unsatisfactory.

40. Mr Sirtes SC, who appears for the Meriton parties, put the matter this way:

“This Court made orders in mid-2023 providing for the Plaintiff to file its evidence and it did so. This Court did not allow parties to file their evidence episodically and at a time of their own choosing. Such a practice would turn case management on its head. Yet, this is precisely what the Plaintiff asks the Court to do now. It does not get another go because it made a forensic decision to prepare expert evidence in relation to some but not all of the units.

Despite the Plaintiff saying that its experts want to go back now and satisfy themselves that their concerns (about ‘systemic defects’) is correct, nothing has changed since they did their first reports. The experts do not say that new defects have appeared since their first reports. It is nothing more than this: ‘we were instructed to only look at some of the units and now the [Owners Corporation] wants us to look at the rest’.

The Plaintiff wishes to put forward a massively expanded case, that requires destructive testing, inspection of all the remaining units it elected not to inspect in 2023, a new Scott Schedule and, inevitably, a pleading amendment, not to mention the time it wants to do this – almost a year.” (Emphasis in original.)

41. I see substance in those submissions.

42. However, despite the unsatisfactory manner in which this case has proceeded, it would not, in my opinion, be just to shut out the Owners Corporation from seeking to establish a case it now proposes. If the Owners Corporation is correct in apprehending that the alleged defects already identified are prevalent throughout the building, there is evidence before me suggesting that the costs to rectify those defects could be as high as $8 million. That is, obviously, a serious matter for all the parties, but the Owners Corporation must, in my opinion, be given an opportunity to establish such a case that, if successful, would have such an impact on all the unit owners.

43. I propose to make orders to the effect proposed by the Owners Corporation save that I propose to direct that any further evidence be adduced by 6 June 2025. Against the possibility that this target proves unable to be achieved, I will make orders to the effect that, if the experts retained by the Owners Corporation advise it that the 6 June 2025 deadline cannot be met, then, by 28 May 2025, the Owners Corporation should serve and provide by email to my Associate evidence and submissions as to what further time the Owners Corporation ought reasonably have to complete service of its evidence. In that regard, I propose to list the matters for directions on 30 May 2025.

44. Further, there must be some terms on which those orders are made. The first will be a term to the effect that the expert evidence to be adduced by the Owners Corporation may only be adduced in relation to units not yet inspected by the Owners Corporation’s experts and is to be confined to defects in those uninspected units which are to the same effect as those which allegedly exist in the units that have already been inspected, with a view to establishing the extent to which the defects identified in the inspected units are prevalent also in the uninspected units.

45. There must also be a consequence as to costs. I propose to order that the Owners Corporation pay the defendants’ costs thrown away by the making of these orders and to invite the defendants within a reasonable time to serve and provide by email to my Associate short submissions and evidence as to the costs actually thrown away to date. I will deal with that evidence as soon as I can with a view to making an order that the Owners Corporation pays those costs forthwith.

46. I also propose to make orders for the filing by the defendants of their List Responses and any Cross-Claims.

47. I invite the parties to confer and agree as to the orders necessary to give effect to these reasons.

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Decision last updated: 17 December 2024