The Owners - Units Plan No 1917 v Koundouris
[2016] ACTSC 96
•13 May 2016
SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Case Title: | The Owners – Units Plan No 1917 v Koundouris |
Citation: | [2016] ACTSC 96 |
Hearing Dates: | 29-30 June 2015, 1-3 and 6-8 July 2015 |
Date last submissions received: | 19 August 2015 |
DecisionDate: | 13 May 2016 |
Before: | Mossop AsJ |
Decision: | See [616] |
Catchwords: | STATUTORY INTERPRETATION – BUILDING CONTRACTS – Building Act 1972 (ACT) s 58C – warranties implied into contracts for the sale of a residential building and contract to carry out residential building work to which the builder is a party – consideration of the two categories of contracts to which the section applies – comma in s 58C(1) cannot be read out – meaning of “has been or will be” – whether warranties involve ongoing or one off obligation on builder – rights of successors in title – meaning of “expire at the end of the prescribed period” – period within which a claim may be commenced varies according to category of contract the warranties are implied into BUILDING CONTRACTS – Building Act 2004 (ACT) s 88 – warranties implied into “every contract for the sale of a residential building” – changes to “prescribed period” – end date for warranties in contracts of sale – period varies depending on whether defect is in “non-structural elements” or “structural elements” – “structural element” broadly defined UNIT TITLES – entitlement of owners corporation to bring proceedings for breach of warranties under Building Act 1972 (ACT) and Building Act 2004 (ACT) – entitlement of unit owners to recover as damages proportional share of amounts paid by owners corporation UNIT TITLES – maintenance obligations of owners corporation under Unit Titles Act 1970 (ACT) and Unit Titles (Management) Act 2011 (ACT) – significance of boundaries of units – boundary runs along the centre of the relevant floor, wall or ceiling –– expansion of obligations of owners corporation to “defined parts” of the building – extent of obligation – whether that includes waterproofing to slabs STATUTORY INTERPRETATION – Limitation Act 1985 (ACT) s 40 – extension of limitation period for action in relation to latent damage to property – provision not limited to cases in tort – section permits extension of time for causes of action in contract LIMITATION PERIODS – Limitation Act 1981 (ACT) s 40 – extension of limitation period for action in relation to latent damage to property – whether damage latent – extent of latency – assessment of matters in s 40(2) – case where defects were known for some time – significance of owners’ failure to investigate defects and obtain independent advice – not fair and reasonable to extend time NEGLIGENCE – whether builder owed a duty of care to the owners to carry out and supervise building work with reasonable care to ensure that the building work was carried out in a proper and workmanlike manner and in accordance with the statutory warranties – no duty of care arose with respect to defects in the original construction due to existence of statutory warranties – duty of care owed in relation to attempts to repair original defective work – duty not one which required bringing the building works up to standard required by the statutory warranties – duty to avoid foreseeable loss to the owners arising from undertaking the repair work MISLEADING AND DECEPTIVE CONDUCT – REPRESENTATIONS – Fair Trading Act 1992 (ACT) – Trade Practices Act 1974 (Cth) – representations made as to rectification of defects – representation must be operative at the point where plaintiff acts of fails to act as a result of it – whether representations made to the effect that there were no defects ESTOPPEL – LIMITATION PERIOD – whether estoppel arose to prevent reliance on limitation defences – defendant’s conduct must generate a reasonable expectation on the part of the plaintiff – plaintiff’s delay in getting advice as to their rights was for reasons other than reliance upon any statements made by the first defendant |
Legislation Cited: | Building Act 1972 (ACT) Building Act 2004 (ACT) |
Cases Cited: | Bellgrove v Eldridge (1954) 90 CLR 613 Brisbane South Regional Health Authority v Taylor (1996) 186 CLR 541 |
Texts Cited: | Attorney-General’s Department, “Proposals for Reform and Modernisation of the Laws of Limitation in the Australian Capital Territory” (Working Paper, April 1984) Macquarie Dictionary (6th ed) |
Parties: | The Owners – Units Plan No 1917 (Plaintiff) Michael Koundouris (First Defendant) Acro Pty Ltd (Second Defendant) |
Representation: | Counsel F P Hicks (Plaintiff) F M Douglas QC with B F Katekar (Defendants) |
| Solicitors Minter Ellison (Plaintiff) Trinity Law (Defendants) | |
File Number: | SC 817 of 2010 |
Mossop AsJ:
Introduction
In 2001, the property the subject of these proceedings was marketed as follows:
Lagani. A magnificent new living style. A place of rest. Luxurious accommodation. Lagani now raises these traditional standards of quality and workmanship to new heights. Indulgence. If you’re going to live in one of Canberra’s finest locations be comfortable doing it.
Such glowing promotion is somewhat ironic having regard to the circumstances of this case described in the reasons which follow.
The plaintiff is the Owners Corporation for Units Plan No 1917 (Owners Corporation), created shortly after the building was completed. The plaintiff also had assigned to it the rights of the current owners of the units in the units plan (the Unit Owners). The first defendant is the builder of the building. The second defendant is the developer, that is, the owner of the land on which the building was built.
A Certificate of Occupancy for the building was issued on 20 December 2000 and the units in the building were sold to incoming purchasers. The present owners of the units are a mix of those who originally purchased the units and those who have bought from original or subsequent purchasers in the period since then.
Shortly after the building was completed, owners started making complaints, most particularly in relation to leaks into the units and into the basement carpark. When responding to these complaints the first defendant, Mr Koundouris, continued to engage in a friendly and apparently helpful way with the Owners Corporation and individual unit owners. Over the period from 2001 until 2009, he continued to attempt to rectify or repair problems with the units arising, principally, from water penetration. The steps he took to rectify the underlying causes of water penetration were ineffective.
Finally, when the owners and Owners Corporation decided to seek independent advice as to how to properly remedy defects, they sought a financial contribution to the cost of that work from the first or second defendant. No agreement could be reached and these proceedings were commenced.
In the reasons that follow I will refer to the plaintiff as the Owners Corporation. I will refer to the second defendant as “Koundouris Projects”, the name under which the company traded.
Pleadings
The pleadings in the case are substantial. The following summary of the pleadings is an attempt to highlight the significant issues that arise out of them rather than to recapitulate them in detail.
Claim
In its Amended Statement of Claim (ASOC) the plaintiff pleads five causes of action against one or other or both of the defendants. The plaintiff identifies that it sues not only in its own capacity, but also as an assignee of the rights of the individual unit owners to take legal action for the recovery of loss and damage suffered by each: ASOC [8].
The first cause of action is an action for breach of statutory warranties by Mr Koundouris. It is alleged that he entered into a contract with Koundouris Projects to construct the Lagani Apartments. This is referred to as the Building Contract. He then constructed the building. This is referred to as the Building Work. It is then alleged that from March 2001, Mr Koundouris undertook further residential building work to investigate and repair defects in the Building Work. This was referred to as the Further Building Work: ASOC [11A].
The plaintiff pleads that the Building Contract had various statutory warranties implied into it by the Building Act 1972 (ACT) (1972 Act) and the Building Act 2004 (ACT) (2004 Act). These are referred to as the Statutory Warranties. Further, the plaintiff pleads that the Further Building Work was to be undertaken in accordance with certain specified statutory requirements. These are referred to as the Statutory Requirements.
Koundouris Projects is alleged to have been the owner of the land on which the building work was carried out up until the registration of the plaintiff: ASOC [13].
The plaintiff alleges that it and the Unit Owners, succeeded to the rights of Koundouris Projects in relation to the Statutory Warranties with respect to both the Building Work and the Further Building Work, or that they are “entitled to the benefit of” those statutory warranties: ASOC [14]-[14A]. Mr Koundouris is said to have breached the Statutory Warranties in relation to both the Building Work and the Further Building Work: ASOC [17]-[18].
The plaintiff alleges that during the five-year period after the completion of the Building Work and the Further Building Work, Mr Koundouris was required to rectify breaches of the statutory warranties and is liable in damages for breach of the statutory warranties in relation to the Building Work, the Further Building Work and also matters described as “the Defects, the Unsuccessful Repairs and the Defective Repairs”: ASOC [16A]. Those additional activities are also alleged to have occurred during the statutory warranty period for the Building Work and the Further Building Work: ASOC [19]. It is alleged that Mr Koundouris failed to rectify the defects and remedy the breaches of the Statutory Warranties: ASOC [21]. It is also alleged that Mr Koundouris breached the Statutory Requirements in relation to the Further Building Work and that, as a result of that, work was defective: ASOC [21A]-[21B]. Damages are claimed for the costs of investigating and rectifying the defects.
The second cause of action is an action in negligence against Mr Koundouris in carrying out building work. It is alleged that he was subject to a duty of care to carry out and supervise the Building Work with reasonable care to ensure that it was carried out in a proper and workmanlike manner and in accordance with the Statutory Warranties: ASOC [27]. He is alleged to have breached that duty by reason of failing to comply with the 2004 Act, relevant Australian Standards, failing to ensure the Building Work was carried out in a proper and workmanlike manner, and failing to comply with the Statutory Warranties: ASOC [28]. The plaintiff claims the same loss and damage as in relation to the first cause of action.
The third cause of action is a cause of action in negligence against both Mr Koundouris and Koundouris Projects. The plaintiff pleads that the investigations and repairs carried out by Mr Koundouris and Koundouris Projects did not rectify the defects: ASOC [32]-[33]. By reason of the foreseeability of loss, the control and supervision exercised by the defendants and the vulnerability of the plaintiff and the Unit Owners, it is alleged at ASOC [34]-[37] that both defendants:
owed a duty to the Plaintiff and Unit Owners to properly investigate the Defects and to carry out and supervise the Unsuccessful Repairs with reasonable care to ensure the attempted repairs were carried out in a proper and workmanlike manner.
That duty is alleged to have been breached and the same losses are claimed as in relation to the first cause of action.
The fourth cause of action is a cause of action for misleading and deceptive conduct against Mr Koundouris. Mr Koundouris is alleged to have made representations to the plaintiff and the Unit Owners, on several occasions, that the repairs carried out were sufficient to rectify the defects: ASOC [42], or that there were no defects relating to water penetration: ASOC [43]. It is alleged that each of those representations was made in trade or commerce, and:
(a)to the extent that they related to future matters, were misleading in contravention of s 11 of the Fair Trading (Australian Consumer Law) Act 1992 (ACT);
(b)were misleading or deceptive in contravention of s 12 of that Act.
The same damages are claimed as in relation to the first cause of action.
The fifth cause of action is a claim of misleading and deceptive conduct by Koundouris Projects. The plaintiff alleges that the representations alleged in the fourth cause of action were in fact made by Koundouris Projects and the claim is otherwise similar to the fourth cause of action.
Defence
The defence to the ASOC alleges that any cause of action which arose accrued no later than 20 December 2000. It alleges that the statutory warranty period had expired no later than 20 December 2005. It alleges that the plaintiff had to commence proceedings in respect of its claim before 20 December 2005 and that the proceedings were only commenced on 29 November 2010. It alleges that the plaintiff’s claim for breach of the statutory warranties was also brought outside the time permitted by s 11 of the Limitations Act 1985 (ACT) (Limitations Act): Defence [16].
The Defence alleges (at [25]) that the claim is an apportionable claim for the purposes of s 107B of the Civil Law (Wrongs) Act 2002 (ACT) (CLW Act) and identifies other persons whose acts or omissions are alleged to have caused the loss or damage for the purposes of s 107D of the CLW Act. They are Riccardo Jugovac, trading as Tiling Impressions (in relation to waterproofing defect claims), Bond James Murtagh Pty Ltd, trading as Murtagh Bond Structures Buro (in relation to the steel work defect claims) and Murtagh Bond and Dezignteam Pty Ltd (in relation to defects in masonry and expansion joints).
In relation to the second cause of action, the defendant alleges that the limitations period commenced on the latter of 20 December 2000 and the time at which the defects became manifest. It alleges that each of the defects was manifest and known to the plaintiff and the Unit Owners prior to 29 November 2004, being six years prior to the commencement of the proceedings. It therefore alleges that the claims are barred by s 11 of the Limitation Act. It repeats the proportionality pleading that was pleaded in relation to the first cause of action.
In relation to the third cause of action, the defendants plead that the limitation period commenced on the later of the date of the defective repair or when the defective repair became known or manifest. It alleges that that was prior to 29 November 2004 (six years prior to the commencement of the proceedings) and hence that the claim is barred by s 11 of the Limitation Act.
In relation to the fourth cause of action, the defence repeats the limitation defence: Defence [50].
In relation to the fifth cause of action, the defence repeats the limitation defence: Defence [56].
Finally, in relation to the whole of the claim in relation to water ingress to or from Unit 10, the defence pleads that between 2008 and 2010 the plaintiff or the owner of Unit 10 engaged “RnB Solutions” to conduct various works on the roof above that unit and on the balcony area of that unit, and that Mr Koundouris and Koundouris Projects did not cause the water ingress to or from Unit of 10.
Reply
The plaintiff filed a substantial Reply. The pleading in the Reply is targeted at those aspects of the defence which assert that the plaintiff is out of time or statute barred. In answer to those claims, the plaintiff asserts that the defendants made representations in order to obtain a certificate of occupancy that the works were compliant with the relevant statutory requirements. It alleges that the representations were made in trade or commerce and that they were misleading or deceptive because the works did not comply with those statutory requirements. The plaintiff alleges that it will suffer loss and damage if the certificate of occupancy is relied upon and say that under s 87 of the Trade Practices Act 1974 (Cth) (Trade Practices Act), or alternatively “as a matter of common law and equity”, the defendant was not entitled to rely upon the certificate of occupancy, having procured it by misleading representations.
Next, the Reply pleads that “numerous and repeated representations” to the plaintiff and the Unit Owners to the effect (in summary) that the defendants had or would repair any defects that existed, that there was no systemic or general defects and that there was no need or reason for the plaintiff or Unit Owners to take legal proceedings: Reply [2(k)]. The various representations are particularised. The plaintiff is alleged to have relied upon those representations so as to “not obtain legal advice or seek to commence proceedings” in the period prior to December 2005 or September 2006. Next those representations in relation to repair are said to have been repeated in the period following September 2006. The plaintiff is alleged to have relied upon those further representations in not seeking legal advice or commencing proceedings in the period from October 2006 to October 2010.
The plaintiff alleges that it was only after the relationship between the plaintiff and the defendant broke down, and the plaintiff engaged an independent contractor in mid-2010, that the owners learnt about the inadequacy of the remedial works undertaken and the fact that there were systemic defects which gave rise to water ingress and penetration.
Next the plaintiff pleads a conventional estoppel arising from the dealings between the parties up until mid-2010, whereby the defendants would undertake investigations and inspections in relation to defects, followed by reasonable and necessary remedial works, and the plaintiff and the Unit Owners, would not commence legal proceedings or otherwise claim compensation: Reply [2(p)]-[2(r)].
In relation to the proportionate liability pleading, the Reply alleges that the claims are not apportionable or that the parties had contracted out of the relevant provisions of the CLW Act. It also pleaded that the parties nominated as concurrent wrongdoers are not liable to the plaintiff for economic loss. Further, it is alleged that the statutory warranties and statutory requirements under the 1972 Act and 2004 Act do not give rise to apportionable claims under the CLW Act.
In relation to the limitation defences, the plaintiff denies that the cause of action had accrued at a date earlier than six years prior to commencement of the proceedings. It says that each of the defects and its damage was not manifest and known to the plaintiff prior to 29 November 2006 and that the claim is not time barred by s 11 of the Limitation Act. In the alternative, the plaintiff says that “given the nature and extent of the defects and the conduct of the Defendants”, the Court should extend the limitation period pursuant to s 40 of the Limitation Act.
Further, in relation to the fifth cause of action the plaintiff says that the cause of action did not arise until damage occurred and damage was not suffered until the defendants failed to undertake investigation and repairs work and the said failure or refusal was only communicated after the time when the defendants say the proceedings were time-barred. The plaintiff therefore says that the claim under s 82 of the Trade Practices Act was commenced within time.
Relevant facts
The statement of the relevant facts which follows is largely based upon the statement of facts prepared by the defendant and modified by the plaintiff.
The building the subject of these proceedings is located in Fawkner Street in Braddon. It has a three level apartment building constructed on it. The building has a car parking area in the basement. Units 1, 2, 3 and 4 are on the ground floor. Units 5, 6, 7, and 8 are on the first floor. Units 9 and 10 are on the second floor. A feature of the development is that there are the large balconies on the second and third floors of the building and large courtyard areas on the ground floor. For aesthetic reasons the building was built without eaves.
The Owners Corporation for the units plan was created under the Land Titles (Unit Titles) Act 1970 (ACT) (1970 Act) and now operates under the Unit Titles Act 2001 (ACT) (2001 Act) and Unit Titles (Management) Act 2011 (ACT).
In 1995, Mr Koundouris became a licensed builder in the ACT and from 1998 he was employed by Koundouris Projects, an entity within a group of companies known as the Koundouris Group, as the Construction and Project Manager.
Mr Koundouris was paid income by the Elder Street Trust in financial years 2000/2001 and 2001/2002. Koundouris Projects was the trustee of the Elder Street Trust.
In 1999, Koundouris Projects engaged various consultants for the design of a development to be constructed at 1 Fawkner Street Braddon in the ACT. Koundouris Projects owned 1 Fawkner Street Braddon. The building that was constructed was named “Lagani”.
As part of that design process various consultants were hired, including: concept architects, construction architects and a structural engineer. During the construction of Lagani, Mr Koundouris and Koundouris Projects relied on those consultants for their expertise to the extent to which they had expertise that Mr Koundouris, as a builder, did not possess.
On 26 February 2000, development approval was granted for Lagani and, on the same day, building approval was granted by Koundouris Projects’ appointed certifier, Mr Joe Gioffre.
The application for building approval listed Mr Koundouris as the licensed builder. Under the heading “Housing Indemnity Insurance Policy details (where applicable as required by the Building Act 1972)” the insurer was identified as the Master Builders Association pursuant to an annual policy with an “insured value” of $5,000,000. The application for building approval was signed by Joe Gioffre on 15 April 2000 under the notification: "I hereby notify the building controller that the person or company described above is to carry out the building work described herein." By this document, Mr Koundouris was appointed as the licensed builder for Lagani. Construction of Lagani commenced shortly thereafter.
Certificates of housing indemnity insurance were issued by MBA Risk Management Services naming Koundouris Projects (being the owner of the building when constructed) as the beneficiary and Mr Koundouris as the builder. The sum insured was $85,000 or the cost of works, whichever is the lesser. Separate certificates were issued in relation to each unit in the development. The certificates were undated and the evidence did not otherwise disclose when they had been issued.
During the course of construction, Mr Richard Forner was on site full-time to supervise the building works, performing the role of ‘foreman’. He was employed by Koundouris Projects or another company within the Koundouris Group. Mr Forner had been a licensed builder since the mid-1990’s and was still a licensed builder at the time of the events giving rise to the plaintiff’s claims.
Mr Forner gave evidence of his recollection that Mr Koundouris:
(a)made every effort to ensure that all of the trades and contractors undertook the works to ensure quality assurance;
(b)issued instructions and directions to each of the contractors involved in the works; and
(c)supervised and directed trades and contractors in the performance of their works.
To facilitate the construction of Lagani, Koundouris Projects engaged various subcontractors to perform the works. Mr Forner gave evidence that Mr Koundouris made the decisions in relation to which subcontractors were engaged based on his own assessment of whatever it was he considered important for those works to be performed.
At the completion of various stages of building work, specifically at the completion of the construction of Lagani, a number of the subcontractors and consultants issued documents to Koundouris Projects via Mr Koundouris certifying the work they had performed at Lagani and the work’s compliance with the relevant Building Code and Australian Standards:
(a)On 1 December 2000, Mr Riccardo Jugovac, (at that time trading as Tiling Impressions), issued a waterproofing workmanship warranty to Koundouris Projects from Tiling Impressions in relation to Superflex waterproofing membrane that stated:
Subject to the conditions appearing over the page, this workmanship warranty applies to the installation of Superflex waterproof membranes for the project detailed above. The applicator warrants that the membrane has been installed as per the manufacturer’s instructions and relevant Australian standards, and that the installation will not lose its water resistant qualities as a result of faulty workmanship for a period of five years.
The “conditions appearing over the page” were not in evidence and, as a consequence, the actual effect of the warranty cannot be determined.
Mr Jugovac had been engaged by Koundouris Projects to waterproof and tile the internal wet areas and the balconies at Lagani. Mr Koundouris relied on his waterproofing expertise.
Mr Forner gave evidence that Mr Koundouris inspected the work being undertaken by Mr Jugovac from time to time. Mr Koundouris corroborated this evidence.
(b)On 5 December 2000, Bridgewater Manufacturing provided certification for the fire rated doorsets installed at Lagani.
(c)On 13 December 2000, Mr Kenneth Murtagh issued a certificate of structural sufficiency which stated that:
I have inspected the above building work and/or the following components and their support elements.
Steel roof structure, floor slabs, vertical steel supports, Ground floor fire rated support steelwork, Ritek walls and Load Bearing block walls, foundations.
and [sic] that to the best of my knowledge that building work is structurally sufficient, sound and stable for the purposes for which it was to be occupied and used.
On the same date, Mr Murtagh also certified that the steelwork supporting the ground floor was certified to have a minimum fire-endurance period of 90 minutes. Mr Koundouris gave evidence that Mr Murtagh had always advised there were no structural issue in regards to the building.
(d)On 13 December 2000, Dino’s Plumbers, Drainers and Gas Fitters wrote a letter stating that all plumbing and draining had been completed in accordance with AS3500 for Lagani.
On 20 December 2000, the ACT Department of Urban Services issued the Certificate of Occupancy and Use for Lagani. Mr Koundouris was stated as the builder on that document. At the bottom of the Certificate of Occupancy and Use was the following statement:
Important Note:
Residential building statutory warranties and residential insurance apply in relation to building work ...
On 9 January 2001, the inaugural meeting of the Owners of Unit Plan 1917 was held and Canberra Units Plan Services (CUPS) was appointed as the managing agent.
Each of the ten units in Lagani were sold between mid-2000 and early 2001. Five of the original owners continue to own their units at Lagani. In each contract for sale with those original purchasers, Koundouris Projects provided a 90 day defects liability period.
Throughout early 2001, each of the purchasers of the units in Lagani contacted Koundouris Projects to report defects to be addressed. Most notably:
(a)On 12 January 2001, the owner of Unit 10 complained about the rendering of balcony walls;
(b)On 18 January 2001, the owner of Unit 6 complained about structural steelwork rusted in the garage area;
(c)On 19 January 2001, the owner of Unit 5 complained about a bulge in the plaster in the ceiling of the living room;
(d)On 12 February 2001, the owner of Unit 2 complained about rain collecting and pooling in the covered courtyard area and subsidence in the garden near the foundations of the balcony;
(e)On 16 March 2001, the owner of Unit 9 provided a list of defects, which included ‘some large cracks in the rendering’ on the main balcony;
(f)On 20 March 2001, the owner of Unit 1 provided a list of defects which included leaking window frames;
(g)On 22 March 2001, CUPS informed James Koundouris that one of the owners of Unit 10 had advised that there was water running down the beams adjacent to his car port area and running along the concrete ceiling; and
(h)On 15 April 2001, Unit 6 provided a defect notification which included a complaint that the water from the patio did not drain away quickly, indicating the drainage was not of sufficient capacity or was blocked, and a note that the ceiling of the living room was stained, indicating water ingress from the unit above.
In response to the complaint of leakage into the basement, on 23 March 2001, Koundouris Projects wrote to CUPS advising that it had sealed the outside steps where the water was travelling through and into the basement.
On 15 April 2001, the owners of Unit 6 wrote to the owner of Unit 9 to complain about water leaking on their ceiling which they believed had been caused by works that had been performed on the Unit 9 balcony. In his evidence, the owner of Unit 9 could not recall whether building work was occurring on his balcony at that time, but did not think it was. He remembered receiving the complaint.
On 8 May 2001, James Koundouris wrote to the owners of Unit 6 and stated that all defects had been rectified. Mr James Leitch, the owner of Unit 9, gave evidence that he recalled repairs being done in that period.
On 15 June 2001, the owner of Unit 9 again wrote to Koundouris Projects to advise that rendering on two of the three walls of the balconies had cracked. The letter stated that this had been fixed on the main balcony, but the crack had returned.
On 20 July 2001, Tiling Impressions provided a further waterproofing workmanship warranty to Koundouris Projects in relation to planter boxes having been waterproofed using a Davco K-10 product. This warranty stated:
This workmanship warranty applies to the installation of Davco waterproof membranes for the project detailed above. The Applicator warrants that the membrane has been installed as per the manufacturer’s instructions and relevant Australian standards, and that the installation will not lose its water resistant qualities as a result of faulty workmanship for a period of (5) years.
On 30 July 2001, CUPS wrote to Mr Leitch (Unit 9), in relation to problems experienced by Unit 5 which was the unit below his:
We believe recently a leak was reported into their unit 5 and our understanding is that it is the result of the unsealed penthouse balcony which should have been fixed.
The occupier of unit 5 is now experiencing a build-up of fungus on the ceiling which was previously leaking. This would indicate that there is some more build up in that area and we would ask that you take the necessary steps to ensure that any leak from your unit into unit 5 has been fixed.
Mr Leitch recalled receiving the letter and recalled contacting Koundouris Projects to inform it of the complaint.
Mr Koundouris gave evidence that James Koundouris would speak to him if he needed direction or assistance about issues that arose.
On 11 August 2001, the Owners Corporation held a meeting. Attached to the Minutes of that meeting was a document recording some notes from a meeting with Koundouris Projects. These notes include the following item:
Water in the basement (coming through the ceiling and walls) – Richie (the site foreman) has said he is working on this. What exactly is causing this and how and when will it be fixed?
Water dripping from ceiling above parking spot unit 2.
On 29 August 2001, CUPS wrote to the “Koundouris Group" requesting a site meeting on 14 September 2001. Koundouris Projects responded to CUPS stating:
We also confirm that we have met all our contractual obligations and do not see a need for any further site meetings.
On 14 September 2001, the Owners Corporation held a meeting. The Minutes of that meeting refer to a ‘leakage problem in the basement’, a decision to ask CUPS to write to each owner to obtain details of outstanding issues and for the Executive Committee of the Owners Corporation (the Executive Committee) to then put a letter to the “Koundouris Group" identifying issues including:
Leaking of water (most likely containing lime) into the basement onto cars.
…
There is severe leaking through the ceilings of Unit 10, Unit 7, Unit 5 and Unit 6.
An Agenda for an Owners Corporation meeting dated 14 September 2001 included:
The Koundouris Group have refused to meet as requested. Where to from here?
An attachment to that Agenda was meeting notes which refer to water in the basement, leaking windows and ceiling in Unit 10, and the Owners Corporation needing more information about the maintenance and warranty agreement on the lift.
On 27 September 2001, the owner of Unit 10 wrote to CUPS on behalf of the Owners Corporation. The letter included:
Could you also please write to all unit owners asking if they have any outstanding issues that need to be resolved with the Koundouris Group. We need details of when the problem first occurred and when it was first brought to the attention of the Koundouris Group. The Committee plans to write a letter to the Koundouris Group and would like to list all outstanding issues in this letter.
…
We need this information before COB Wednesday 10 October.
On 22 October 2001, Mr Leitch (Unit 9) wrote to CUPS in relation to outstanding repair issues including cracking in the main balcony wall, water leakage into the garage over his car space and some windows that leaked when it rained.
On 31 October 2001, a number of the Lagani owners wrote to James and Michael Koundouris to raise outstanding issues including:
11.Drainage hole on the balcony of [Unit 5] is too small to drain rainwater from it, so leaves pools of water causing it to be dangerous.
...
13. The main balcony wall [of Unit 9] is cracking.
14. Water leakage into garage over No. 9 parking space.
15. Most of the [Unit 9] apartment windows leak during rain storms.
...
17.Several large cracks have re-appeared on the top of [Unit 10] balcony wall and about 5 cm from the top...
18.Major pooling of water on [Unit 10] balcony (westerly side) in 2 spots – up to 3cm deep.
19.Leak through the ceiling in main living area [of Unit 10] which has caused water damage to the ceiling, a long crack (approximately 90cm) and damage around a light fitting.
...
22. Most windows [in Unit 10] leak when they are washed down with hose.
On 8 November 2001, Koundouris Group responded to the issues that had been raised by the owners. This response was generally that the items had been fixed, would be fixed or were not required to be fixed and included:
(a)item 3 (leaking to basement): “Currently being rectified. Waiting for dry weather”;
(b)item 6 (water pooling in courtyard): “Water will pool in courtyards. Please identify areas and we will investigate”;
(c)item 7 (most of the apartment windows leak when they are washed/posed): “Please advise if windows leak when it rains. Windows are designed for the elements. Richard Forner to arrange James Hardie to inspect and rectify if required.”
(d)item 10 (basement bricks leaking when it rains affecting storage to Unit 5): “Richard Forner to check. Ventilated carpark exposed to elements as per BCA requirements”;
(e)item 12 (drain hole on Unit 5 balcony too small): “Drains are per approved drainage plans and comply with Australian Standards. No action”;
(f)item 13 (several leaks in second bedroom of unit 5): “Leak has been fixed 28/8/01. Richard Forner to check again”;
(g)item 14 (main balcony wall of Unit 9 cracking): “Koundouris Project to provide Colourbond capping to top of parapet wall. Unit owner required to agree to rectification method”;
(h)item 15 (water leakage over Unit 9 parking space): “Currently being rectified”;
(i)item 18 (cracks on Unit 10 balcony wall): “Richard Forner to complete with capping. Unit owner required to agree to rectification method”;
(j)item 19 (pooling of water on Unit 10 balcony): “Balcony as per approved hydraulic design and meets requirements of the BCA”; and
(k)item 20 (leaks through ceiling of living area Unit 10): “Koundouris Projects have fixed. Currently waiting G Weinert to allow subcontractor to finish rectification.”
On 12 November 2001, Koundouris Projects wrote to CUPS stating that James Hardie Windows had resealed window beading for Units 9 and 10.
On 20 November 2001, Mr Gordon Weinert (Unit 10) wrote to Koundouris Projects regarding steps to fix his ceiling. The letter stated, inter alia:
I have had independent advice as to the best method to fix the water damage to ensure that it will not re-appear in the short to medium term. This is different to what was suggested by the painter arranged by you, who assessed the damage yesterday…
My acceptance of responsibility for the repair of the crack does not extend to any other damage, including reappearance of the repaired crack, that may occur due to future water leaks that are the responsibility of the builder to repair according to ACT Regulations.
On 21 November 2001, Mr Koundouris wrote to Mr Weinert (Unit 10) refusing to accept the proposal that other contractors complete the work and stating that Mr Koundouris’ tradesmen would do the work if he would give them access.
On 27 November 2001, in a letter to James and Michael Koundouris of Koundouris Projects, Ms Joanne Weinert (Unit 10), on behalf of the Body Corporate, sought a meeting to discuss outstanding issues. The letter attached a schedule of alleged defects amended since 31 October 2001, including:
(a)Item: Leaking of water when it rains into the basement;
(b)Item 13: Several leaks into the second bedroom around the window of Unit 5;
(c)Item 14: Main balcony wall of Unit 9 is cracking;
(d)Item 15: Water leakage into garage space over Unit 9 parking space;
(e)Item 16: Leaking apartment windows in Unit 9;
(f)Item 18: Several large cracks on the balcony wall had reappeared at Unit 10;
(g)Item 19: Pooling water on the balcony of Unit 10;
(h)Item 20: Leaking through the ceiling in the main living area of Unit 10.
The letter requested that Mr Koundouris attend a meeting, rather than Richard Forner, to avoid the need for Mr Forner to report back to Mr Koundouris. Mr Koundouris gave evidence that Mr Forner would seek his approval or instruction in relation to significant proposed remedial works.
On 30 November 2001, Koundouris Projects responded to that letter setting out an updated response to the schedule. The updated response to particular items was as follows:
(a)Item 3: “Has been rectified”;
(b)Item 6: “Not raised during defects period. Please identify.”;
(c)Item 10: “Currently being rectified”;
(d)Item 15: “Rectified”.
Mr Koundouris gave evidence that his understanding of the position was:
(a)as put in that letter;
(b)a statement made honestly and candidly; and
(c)intended to be relied upon by the owners in terms of their own satisfaction of the issues.
On 10 December 2001, Mr Koundouris and Mr Forner met committee members of the Owners Corporation.
In relation to this attendance, Mr Koundouris gave evidence that:
…at all times during this whole process we engaged with whoever it was – the unit owner – and I'm sure there were conversations – on ones – I don't remember the exact time but during the whole process – the whole process – we were always available.
On 7 January 2002, the owners of Unit 10 wrote on behalf of the Owners Corporation to Mr Forner attaching a schedule of defects. This was to follow up on previous requests for rectification of defects including water leaking into the carpark, the cracking of balcony walls and water leakage into Unit 10. The email also indicated that there appeared to be a water leak in the foyer ceiling.
On 29 January 2002, CUPS wrote to James Koundouris complaining about a leak in the foyer and requesting that someone seek out the source of the leak and rectify it. Koundouris Projects responded to this letter on 31 January 2002 by letter signed by Michael Koundouris stating, in effect, that the leak into the foyer was not a defect.
On 7 February 2002, the owner of Unit 10 sent various emails to a number of Lagani owners. One of those emails referred to water leakage into Unit 5 and stated:
They have had the same leak for over 12 months and have reported it on many occasions.
Another stated:
I received letters from both apartments below mine last year concerning water damage to their ceilings. Koundouris/Ritchie assured me that they had identified and fixed the problem.
The second stated:
We’ve had assurances of getting things this week … Gordon and I are of the opinion that we should give them another chance to do the right thing …
The last email referred to:
(a)the denial of responsibility by the Koundouris Group for faulty water pumps; and
(b)inadequate repairs undertaken in relation to water leaks in the basement.
Mr Leitch's evidence was that after the attendances in 2001 and assurances in 2001 and 2002, he understood the leakage from the balcony of Unit 9 into the units below had been resolved.
On 25 February 2002, CUPS sent an email to Koundouris Projects stating:
Seepage through most of the basement walls and in particular the dripping over the car parking spaces for Units 9 and 10 has been reported on numerous occasions.
On 28 February 2002, the owner of Unit 10 sent an email to “Frank” (Unit 6) copied to certain owners in Lagani referring to water leakage problems, dripping over carparks and cracking in balconies. The context appears to have been a request for Mr Frank Johnson (Unit 6 owner) to attend the Owners Corporation meeting and that quotes would be obtained from consulting engineers to assess the building. This email stated the following in relation to obtaining quotes:
We don’t want anything official at this stage, just a quote from the engineers, and need to be aware that if this goes through to the body corporate that it is kept on the public file (that prospective buyers have access to)…Could I recommend that if you follow up 2 of the 3 engineers that… is one, as he is the most likely not to be influenced by the power/influence of the builders.
On 7 March 2002, Hughes Trueman provided the owners with a fee proposal for a building inspection at Lagani. The proposed fee was $3,300 including GST. The Owners Corporation did not go ahead with obtaining a report from an engineer at that time.
On the subject of the potential report, Mr Leitch (Unit 9) gave evidence that:
(a)the owners were already receiving advice from Mr Koundouris at the time, and were always weighing up the issues;
(b)it was not clear at the time that the issues were caused by the construction and the owners were still trying to identify the causes of the leaks;
(c)there were obviously issues with cracks and leaks everywhere and they were still being investigated;
(d)it was a possibility that an engineer would be able to advise on the cause of the leaks;
(e)at the time they were consistently talking with Koundouris Projects, so part of the process was going back and forward with them while they were investigating what was going wrong;
(f)at every stage the owners reported issues, Koundouris Projects would respond and work through the problem the owners had at the time;
(g)it was not necessarily clear at the time that obtaining advice from an independent engineer was advisable;
(h)costs would have been a consideration, but their interaction with Koundouris was also a consideration at the time.
On 1 May 2002, Mr Koundouris wrote to CUPS advising that the 90-day maintenance for Lagani had expired. A list of contact details for ‘key subcontractors’ was provided.
On 6 May 2002, Mr Weinert (Unit 10) wrote a letter to Mr Koundouris ‘putting the record straight’ on alleged defects and what had been said in response to them. Included in the letter was this statement:
I fail to understand what is unreasonable to expect that our unit should not leak. Also, what is unreasonable in expecting that any repairs done to rectify these leaks should permanently correct the cause of the problem. The approach taken so far has been to disguise it by using silicone to seal all the possible sources of the leak without any regard to the long term effectiveness of this approach as well as the aesthetic impact to the unit.
After referring to difficulties with this approach to repairing the leaking windows, the letter continued:
A discussion then ensued where I indicated that taking the same approach as taking to repair the leaking roof was unacceptable as it would be clearly visible that it was a patch up job. At this time I expressed my dissatisfaction with repairs to the roof as I felt that they did not permanently fix the cause of the leak, merely disguised it.
… So far, all that has been done is a lot of head scratching and comments by Mr Forner to the effect that he cannot understand how it can be leaking and he has no idea where it is coming from. Therefore he has taken what seems to be his standard approach to these sort of problems and slap sealant everywhere in the hope that it will go away.
On 1 June 2002, the Owners Corporation held a meeting. Agenda items included “[p]ainting of foyer ceiling”, “[b]lack doors at Eloura Street – white stain” and “[l]eakage into the building”.
On 3 June 2002, Mr Koundouris wrote a letter to Mrs Weinert (Unit 10) stating (among other things):
Waterproofing: - Koundouris Projects have made several attempts to rectify this issue, with the last attempt being John Rae of Skillseal. A reputable tradesman is not willing to liaise with you, as he felt hindered in his ability to do work and felt subject to unreasonable demands with outrageous specifications/scope of works verbally advised by G. Weinert. If you undertake to make the site available to allow our tradespeople to do their job, we can arrange for the rectification to be done.
Rectification to the foyer ceiling was done outside the 90-day maintenance period at no charge to the body corporate.
On 5 June 2002, CUPS sent a letter to the owners of the units in Lagani which referred to an Owners Corporation meeting at which it was resolved that CUPS would write to all owners requesting that they detail any building related problems they (or their tenants) may be experiencing with their units. The letter continued:
We understand from the Committee that it is aiming to resolve any outstanding issues relating to the building with the builders. The Committee is particularly interested in any leakage problems into the units.
On 19 June 2002, Michael Koundouris wrote to Mr Weinert (Unit 10) undertaking to rectify certain issues with certain methods, and stating that the ceiling had been fixed and completed and no further action was required. The letter continued:
Please note we do not accept liability for any of the works. If our terms are not acceptable please forward any future correspondence to our solicitors.
On 12 August 2002, Mrs Weinert (Unit 10) sent an email to Mr Koundouris regarding the leak into the ceiling of the foyer, reported some months earlier, and stating that, notwithstanding the previous repair by Michael Koundouris' tradesmen, the leak had started again.
On 27 September 2002, CUPS wrote to Ari Lyras (Unit 3) stating:
We have been advised by a committee member that it has been ascertained that the drip in the basement onto the carport of Unit 5 is caused by problems within Unit 3. It has been requested by the committee member that if you wish to have this matter fixed that you may do so under the five year building warranty and make approaches to the developer.
On 4 November 2002, Ms McLeod (Unit 2) sent an email to CUPS complaining about a water leak from Unit 6 into Unit 2 caused by the use of the dishwasher water hose to clean the balcony when the tenants were moving out, which resulted in water pouring through her ceiling from around one of her lights.
On 14 November 2002, there was an exchange of emails between Ms McLeod (Unit 2) and Mrs Weinert (Unit 10) about a forthcoming Owners Corporation meeting regarding the possibility of consulting BEPCON about the water leakage problems from Unit 6 into Unit 3 to see what BEPCON had to say and to see if they could insist that “Koundouris Brothers” fix all the floors. The reference to BEPCON was to ACT Building, Electrical and Plumbing Control, an administrative unit of the ACT government.
In December 2002, Mr Michael Kumm was appointed as Body Corporate Manager for Lagani. Mr Kumm remained the managing agent until 2006.
During this time Mr Kumm was aware that there were a number of problems with the Lagani Apartments including issues with water penetration and leakage. In particular, there were issues with the balconies of Units 9 and 10, which formed the roof of living areas in the units underneath. Mr Kumm's evidence was that there were ongoing issues with water penetration from these balconies, and they seemed to get worse over time.
On 23 January 2003, Skillseal Waterproofing Services sent Mr Forner a quote to fix a water leak at a Lagani balcony. Although the quote did not state which balcony was the subject of the quote, having regard to other evidence, it is likely that it was for Unit 10 – the Weinerts. The quote refers to an on-site discussion with Mr Forner and notes, "for reasons earlier discussed, no warranties would be forthcoming.”
Mr Forner gave evidence that when he attended the Lagani Development at Mr Koundouris' instruction, he would have to go back to Mr Koundouris and report before doing anything, that he would tell Mr Koundouris what he had seen and been told at the Lagani Development, that he would ask Mr Koundouris how to attend to the problem and that Mr Koundouris would then direct and instruct Mr Forner as to what he should do.
Mr Forner also gave evidence that he was aware, from at least 28 January 2003, that the leaks from Unit 10 were caused by a failed waterproofing membrane, and he would have, in accordance with his practice, informed Mr Koundouris of this assessment.
On 4 March 2003, Mr Koundouris received a letter from the Weinerts (Unit 10) in response to the proposal to fix their balcony leaks.
On 7 April 2003, Dr Rushbrook inspected the Owners Corporation’s records. The notes made by Dr Rushbrook at that inspection referred to balcony wall cracking and apartment windows leaking in Unit 9, and concerns about the area above the carpark of Unit 9, plus leaks from the Unit 3 to Unit 5 carpark. Dr Rushbrook gave evidence that from his inspection, he did not consider the leaks serious and that he would not have purchased Unit 5 if he had known about the severity of the leaks.
Following a discussion with Mr Koundouris, on 10 April 2003, Mr Kumm faxed a letter to Mr Koundouris complaining about leakage into the common area at Lagani.
On 28 April 2003, Ms Jennifer Lindsay and Dr Lewis Rushbrook signed a contract to purchase Unit 5 of Lagani. Ms Lindsay gave evidence that she did not understand, in 2003, that the leaks were caused by leaks from other balconies.
On 5 May 2003, Mrs Weinert (Unit 10) emailed Mr Koundouris, copied to Mr Kumm, asking for rectification work to be done on leakage problems into Lagani’s foyer and the units below her balcony. This email attached correspondence dated 4 March 2003.
In May 2003, Unit 5 was leased (until May 2006). From that date, a number of leaks were reported by the tenants in Unit 5, to their agent, Maloney’s Real Estate.
On 12 June 2003, Mr Kumm met with Mr Koundouris to discuss repair works by the “Koundouris Brothers”.
On 13 June 2003, Ms McLeod (Unit 2) wrote to the Koundouris Group complaining about a door lock, as well as other matters, and attaching copies of previous requests for rectification. In particular she said:
I also refer to the email of 9th January 2002 [18 months before] and in particular the last paragraph. The recent rain has caused swelling of the ceiling in my courtyard which is below the balcony of Unit 6. The crack referred to in my email has widened and there is obviously water penetration from the unit above. My December letter sets out my concern with regard to water from the kitchen of unit 6 flooding into my unit. I have had no response to this letter and although I have had no further incidents of this problem the fact remains that it could happen again under similar circumstances as before and no steps appear to have been taken to find, and correct, the cause of the problem
On 2 July 2003, Ms Lindsay (Unit 5) attended her first Owners Corporation meeting. The Draft Agenda for that meeting referred to the fact that the tenant of Unit 5 had been contacted about the leakage and had advised it “seems ok now”, but also referred to leakage from the Unit 1 floor.
On 5 August 2003, Mrs Weinert (Unit 10) sent an email to Mr Koundouris referring to outstanding building issues including:
(a)the reappearance of a crack which had been fixed 10 months ago; and
(b)the fact that the resealing of the balcony to rectify leakage problems into the common foyer and Unit 8 below had still not been done.
The email indicated Mr Forner had said the guarantee on the method of repair was 10 years.
On 5 August 2003, LJ Hooker sent a facsimile to Mr Koundouris about Unit 10 requesting that attention be given to the ceiling of the balcony and external blistering and cracking. The facsimile followed up on a conversation Mr Kumm had with Mr Koundouris.
On 13 August 2003, Mr Leitch (Unit 9) sent an email to Mr Koundouris which stated:
As you know I have had a consistent problem with cracking on my balcony, and I have reported this many times to Koundouris. Each of these times an attempt to fix the problem has been made, the last of which was applying a membrane called Emer-Clad. Unfortunately, this has again proved unsuccessful and the balcony has some very large cracks appearing.
On 27 August 2003, Mrs Weinert (Unit 10) sent an email to other owners at Lagani stating that ‘Ian’ from Koundouris Group would be investigating where the water leakage from Unit 10 was coming from.
On 29 August 2003, Mrs Weinert (Unit 10) sent an email to other owners at Lagani referring to leakage from Unit 10 into Units 7 and 8. It stated that the source of the water leak had been identified as being a leak through a section of the roof of Unit 10 into Units 7 and 8 and down through to the foyer ceiling. It also stated that:
Being an internal leak, they [Mr Koundouris/Koundouris Projects] are obligated to fix the problem quickly...
Once the source of the problem is fixed, they will attend to fixing the damage caused by the leakage.
Mr Leitch (Unit 9) gave evidence that he recalled works being done on the roof at this time, but that the leaks persisted.
On 2 September 2003, Mrs Weinert (Unit 10) told Ms Lindsay (Unit 5), and a number of other unit owners, by email that Koundouris was attending the property on 6 September 2003 to identify any and all leakage problems and get them fixed.
On 8 September 2003, Mrs Weinert (Unit 10) sent an email to various owners at Lagani to provide an update on leakage problems and stating that:
Nick (who we met on Saturday) and the roofing guy think they have identified the source of the problem – several cracks in the roof.
A temporary (silicon) fix was applied on Saturday morning.
Nick will put forward suggested methods of repair to Koundouris Group.
Koundouris Group will decide what method of repair they will undertake.
The roofing person will fix the roof as per the method approved by Koundouris Group...
Koundouris Group will arrange for repair of the water affected areas ASAP, once the roof has been fixed.
...
On 24 November 2003, Ms Joelle Stoelwinder (Unit 8) sent an email to some of the Lagani owners and Mr Kumm, which referred to heavy rains causing leaking into her apartment and leakage onto her car in the basement.
That email was a response to Mr Weinert's (Unit 10) email of 23 November, which stated that Nick from Koundouris Group attended Lagani and had said the ongoing works would continue until everything was fixed, and the nature of the works made it difficult to give definite timeframes.
On 26 November 2003, Mr James Dalton (tenant of Unit 7) sent an email to a number of Lagani owners complaining about a leak into Unit 7 through the ceiling, and a leak into the foyer.
On 17 December 2003, Ms Stoelwinder (Unit 8) sent an email to other unit owners in Lagani complaining about water leaks into her apartment.
On 13 March 2004, Ms Stoelwinder (Unit 8) sent an email to the Koundouris Group complaining about water leaks into the basement.
On 23 March 2004, Ms Judy McLeod (Unit 2) sent a letter to Mr Koundouris complaining about leakage of water from the balcony of Unit 6 into her unit. The letter states that Nick (a representative of Koundouris Projects) looked at the ceiling and was quite shocked and assured her it would be attended to.
On 3 September 2004, a tenant inspection report of Unit 5 prepared by Maloney’s Real Estate referred to leaks in Unit 5.
On 16 November 2004, Superior Waterproofing Systems issued an invoice to Koundouris Projects for investigation and repairs into Units 9 and 10 regarding water leaks.
Throughout 2005, Mr Koundouris regularly told Mr Kumm:“If it is our responsibility we will attend to it.”
On 20 January 2005, Ms Stoelwinder (Unit 8) sent an email to Mr Kumm stating that she had made a claim on her insurance for repairs to damage for water leaks and had been notified that any further property damage should be the responsibility of the Owners Corporation.
On 25 January 2005, Koundouris Projects received an invoice from Superior Waterproofing Systems to deal with the water leak at Unit 9.
In February 2005, the Owners Corporation held its Annual General Meeting. At this meeting the Owner’s Corporation considered obtaining an expert’s report into defects. The Minutes of the meeting included the following statement:
The meeting authorised the Managing Agent to commission a report for the Body Corporate on the water problems and the likely impact for the corporation at the end of the five year warranty period by Koundouris Projects.
The report will hopefully be finished by the middle of the year and should address the questions:
‘What are the causes of the leaking?’ and ‘What are our rights?’
Although Mr Kumm’s recollection of this meeting was not good, it is likely, having regard to his evidence and the resolution recorded above, that he reminded the owners about the upcoming expiry of the five-year statutory warranty period. In March and July 2005, Mr Kumm obtained quotes to investigate and report to the Owners Corporation on water leaks within the building. The quotes were for amounts of $4000 and $4950 respectively.
Dr Rushbrook (Unit 5) gave evidence that his understanding was that the owners thought the builder was meeting with a degree of success in making repairs to the building and therefore didn't seem to warrant contemplating an external report at that stage.
Mr Leitch's (Unit 9) evidence was that:
(a)if he had not been given the reassurances by Mr Koundouris, or had not seen the efforts made to inspect, investigate and repair the problem, he would have taken steps to have the matters independently investigated, and considered legal proceedings;
(b)he was concerned about the cost of getting the report but, at the time, Mr Leitch did not consider it was necessary as he had been given repeated and regular assurances that Mr Koundouris would rectify the problems; and
(c)while in hindsight it made sense that the owners might have obtained a report in 2005, at the time, the owners were engaged with Koundouris directly, he was responding to all of their issues and would come in and deal with them on each occasion. The owners had an ongoing relationship with Koundouris Projects, and Mr Leitch’s perception was that, if the owners had an ongoing problem that was reported, Mr Koundouris would continue to work on the issue.
Although the evidence of Mr Leitch as to the assurances given by Mr Koundouris was non-specific, I accept that, with a few minor exceptions in the early stages, this was the tenor of Mr Koundouris’ interactions with the unit owners up to this time.
On 18 April 2005, a tenancy inspection report for Unit 5 referred to leaks in Unit 5.
From 10 July 2005 through to 18 August 2005, an employee of Koundouris Projects, Mark Jakobasch, attended the premises for approximately 14 hours to perform work. Other tradespersons also attended Lagani during this time.
On 18 August 2005, the owners held a Special General Meeting. The Minutes of that meeting recorded (among other things):
Water leaks
The meeting discussed at length the water leaks in the complex. Koundouris Projects were still endeavouring to rectify the situation and, at this stage are meeting with a degree of success.
The Managing Agent reminded the meeting that at the AGM an amount of $500 was set aside to commission a report from an engineer to determine our rights of redress, if necessary from Koundouris.
Two quotes (attached) were tabled for $4000 and $4500. The meeting decided not to proceed at this stage with a report.
The meeting was informed that unit 6 is still leaking and unit 3, whilst no longer leaking, is in need of internal repair. The managing agent will advise Koundouris accordingly.
Mr Kumm gave evidence that the Owners Corporation did not proceed with the report at that stage because of costs. Mr Kumm also said that “it had stopped raining”.
Dr Rushbrook (Unit 5) gave evidence that in August 2005:
(a)he was aware that there would have been an architect and an engineer engaged to design the Lagani apartments, but that his state of mind as to rights of redress was that the builder built it, and it is up to him to determine where the rights of redress would be and who might have failed in the construction of the building;
(b)he did not know that he needed to seek legal advice to ensure that such rights as the Owners Corporation or himself as an owner had in respect of the leaks at the Lagani apartments did not expire;
(c)the managing agent had advised them of a five-year warranty period, but had not suggested that the owners get legal advice;
(d)he was not specifically aware of a limitation period in respect of commencing legal proceedings; and
(e)things seemed to be possibly moving in the right direction with the builders and he believed the owners would not need to be seeking legal advice at that point.
From 21 August 2005 to 10 November 2005, Mr Jakobasch (Koundouris Projects) and other subcontractors attended Lagani. Specifically, Koundouris Projects was invoiced by Tiling Impressions for:
(a)carrying out work at Unit 10 on 9 September 2005 ; and
(b)rectifying water leaks through window for Unit 10 on 27 October 2005.
The Tiling Impressions invoice of 9 September 2005 recorded that the warranty for the Lagani Development was terminated due to excessive building movement and Tiling Impressions would not be held liable for further water leaks. The invoice indicated that grout was removed from the perimeter of the Unit 3 balcony and a product intended to fix the problem (“PU 25”) was applied. There is a reference to “further investigations” disclosing that “the leak was coming through from front window”, but it is not clear what this means. It appears that the identified source of the leak was not in fact fixed at that time, because the invoice in October 2005 was for work done to “rectify water leaks through window ordered by Mark Jakabach”.
Mr Koundouris gave evidence that he was not aware of communication (prior to 17 July 2007) to the owners that there had been significant building movement such that the water leaks were going to be an ongoing problem, because he would not rely on a tiler's assessment of the defects. He also gave evidence that he was not aware of any document recording him directing investigation of the building movement suggested by Tiling Impressions.
On 31 October 2005, the contract for the sale of Unit 8 by Ms Stoelwinder to Mr Rocco Cecere was exchanged. Mr Cecere was a lawyer.
On or around 4 December 2005, Mr Guiseppe Gallo attended Lagani to complete some unidentified “maintenance”. Mr Koundouris was not aware of any reason why Mr Gallo would have attended Lagani at his direction other than in respect of defects.
On 26 January 2006, concerns about ongoing leaks were raised at the Annual General Meeting of the Owners Corporation. The Minutes of the meeting include the following:
Roof and balcony leaks
The meeting authorised the managing agent to write a strongly worded letter to Koundouris Projects and ask that the leak to unit 7, the uneven paving to the balcony of unit 10 and the staining to the ceiling of entry foyer be attended to as a matter of urgency.
The managing agent also undertook to obtain a quote to have these issues resolved in case Koundouris Projects do not meet their obligations.
In relation to the “strongly worded letter” and the concerns of the meeting:
(a)Mr Kumm gave evidence that the drought had started to break and there was more rain so the leaks were obvious;
(b)Ms Lindsay (Unit 5) gave evidence that the owners’ concerns about the leaks had been increasing, that Mr Koundouris had kept coming back to fix the leaks and that the owners had wanted to keep the leaks on his agenda. She further said that the leaks were obvious and apparent in the rain, whereas the cracks were apparent when there was no rain, though the owners’ concern did not go away in-between; and
(c)Dr Rushbrook (Unit 5) gave evidence that the letter was to be “strongly worded” because there were a large number of repairs coming up at the time and they wanted to make it clear to Koundouris Projects that they were unsatisfied with the state of repairs at that point.
Mr Kumm gave further evidence that while he was aware overall of the issues within the five-year period, the relevant work was underway, or was being undertaken, and Mr Kumm found Mr Koundouris was amenable to being approached to rectify works.
On 30 January 2006, Ms Nancye Jeffery (new owner of Unit 10), wrote a letter to Mr Kumm, copied to the owners of Units 2, 5, 6 and 9, referring to the Annual General Meeting held the week before and stating that certain matters were not adequately addressed and seeking information from the files so that the Executive Committee could plan for future repair/maintenance programme. Among the issues were:
The current situation for claims against complex builders Koundouris re water leaks and repair of paintwork from water leaks. I understand that we are all but at the end of our five year maintenance for structural problems period, however it is undisputable that the paintwork and the leaks have been ongoing for at least two years that I know about and still causing grief.
On 19 April 2006, Ms Jeffery (Unit 10) sent an email to Ms Lindsay (Unit 5) stating:
We had another plumber man come yesterday to shed some light on the water leak, apparently number 7 is getting a leak in again. We have put in a call to Mark from Koundouris and Michael Kumm and will let you know the outcome after we speak to Michael tomorrow. – What a pain I thought this was all fixed.
On 3 May 2006, the Owners Corporation held a meeting. The Minutes of that meeting dealt with water leaks again. Mr Kumm and Ms Jeffery (Unit 10) were to collect reports from all unit owners about current water leaks, and Mr Kumm was to ask Koundouris Projects to devote one of their staff to it until it was resolved.
On 17 May 2006, Ms Jeffery (Unit 10) sent an email to Mr Kumm reporting on water leaks at the units, including damage to Units 3, 5 and 6 and water leaks in Unit 7.
In May 2006, Ms Lindsay (Unit 5) moved into Unit 5 (and remained there until 2009). At this time, Ms Lindsay observed cracks in the skirting boards from water leaks. She prepared a list of defects which included reference to water damage on walls of the unit.
On 7 July 2006, Mr Koundouris inspected the Lagani Apartments with Mr Kumm and Ms McLeod (Unit 2).
On 17 August 2006, Ms Jeffery (Unit 10) sent an email to Mr Kumm asking for a notice to be put up indicating that Koundouris Projects was attending the site on 21 August 2006 “to finalise the leak repairs to our complex”.
On 18 August 2006, Koundouris Projects was sent an invoice from Tiling Impressions for maintenance work conducted on the Unit 10 balcony. Tiles were removed in order to find a water leak, but no water leak was found and the process was stopped. It is not clear what area of tiles was removed or what areas were inspected. The surface was then prepared for waterproofing and two coats of waterproofing were applied. Floor and skirting tiles were then replaced and grouted.
On 1 September 2006, Ms Jeffery (Unit 10) sent an email to members of the Executive Committee and Mr Kumm stating:
We understand after speaking with Mark from Koundouris last Friday, that the repairs being carried out to our balcony area have been completed but final water testing was not able to be carried out because access to unit 7 was again denied. The contractors who had come to make the final repairs to affected units had not completed work because of illness.
Once this work is completed it is my understanding that the water leak issue will finally be at an end.
Workers arranged by Mr Koundouris attended the Lagani Apartments a number of times in August and September 2006 to flood balconies to test whether works had rectified the problems.
On 19 September 2006, Koundouris Projects sent a letter to Mr Kumm. Mr Koundouris’ evidence was that he may have sought legal advice in relation to the letter. The letter stated:
We refer to the above contract.
In reference to any ongoing concerns that you have with the defects to the Lagani Apartments.
Please be advised that the defect period under the above contract has expired. We are therefore no longer contractually liable for any rectification works that you say you may require to be carried out. However, we are happy to meet with you on a ‘without admission’ basis and as an expression of good faith, with a view to discussing any concerns that you may have.
If, after meeting with you, we come to an arrangement in respect of your concerns, then we might undertake to carry out any such arrangement but we will do so on condition that it is done without any admission of liability on our part. If, after inspection, your concerns relate to a matter for which we concede we have statutory responsibility then naturally we will honour our statutory obligations.
Mr Leitch (Unit 9) gave evidence that he didn't receive the letter of 19 September 2006, but recalled the letter. Ms Lindsay (Unit 5) gave evidence that she received the letter and it did not change her view about legal redress, being that Mr Koundouris was responsible for the quality of work that he did.
In early October 2006, Koundouris Projects was invoiced by subcontractors for further maintenance work at Lagani, including Unit 7, the penthouse unit (which would be either Unit 9 or Unit 10) and Unit 5. It is not clear whether this related to waterproofing on balconies and, if so, precisely what area was targeted.
On 10 October 2006, Ms Jeffery (Unit 10) sent an email that appears to refer to the work undertaken, stating:
Water leaks
Koundouris builders have been working here again during the past week and yesterday removed their ladders etc. Do we now assume that all is finalized and fixed? Or does someone still have a problem. I am happy to stay out of the loop as we have not had a problem and will assume either all is now fixed or individual owners are making their own arrangements.
On 10 October 2006, Mr Cecere (Unit 8) sent an email to Ms Jeffery (Unit 10) stating that there was a leak in the ceiling above his carpark.
Mr Koundouris gave evidence that, if he had been contacted about this issue, notwithstanding the content of the 19 September 2006 letter, his general approach to issues of defects remained: that he would send individuals to the premises to investigate, and if thought reasonable, repair.
On 17 October 2006, Ms Jeffery (Unit 10) sent an email to Mr Kumm stating that the water leak was still happening from Unit 1 to the carpark.
On 22 October 2006, the Minutes of the Lagani Executive Committee meeting recorded the following:
Koundouris
Judy and Jenny both plan to correspond with Koundouris re inadequate recent repairs.
Mr Leitch (Unit 9) gave evidence that he thought at the time the committee considered the repairs inadequate, but their approach was an ongoing discussion with Mr Koundouris to work out where the water was and how to repair it. He gave further evidence that the scale and significance of the issues were not obvious to the owners.
On 28 October 2006, Ms Lindsay (Unit 5) wrote a letter to Mr Koundouris complaining about the inadequate touch up repairs to water damage in her unit and stating that the repairs dated back to the time of completion of the building.
On 30 October 2006 and 26 November 2006, Koundouris Projects was invoiced for maintenance work at Lagani, including Units 2, 3, 5 and 7. Once again it is not clear whether this related to waterproofing on balconies and, if so, precisely what area was targeted.
Mr Koundouris gave evidence that between 2001 and 2006, unless investigations concluded that a problem was the result of some occupation or use of the premises, his approach was to attend to rectification of the problem.
Mr Leitch (Unit 9) gave evidence that while he was aware that the warranty period was running out, he and the other owners did not have a full understanding of the limitation periods that could apply to various cases, or an understanding that Mr Koundouris would have had causes of action against other parties. He also stated that while it was now obvious that the owners should have sought legal and technical advice in 2005/2006, at the time the owners were still talking with Mr Koundouris regularly, and had decided not to proceed with obtaining reports because of the perceived lack of merit in doing so when they still had the relationship with Mr Koundouris.
On 21 March 2007, Minutes of the Owners Corporation Annual General Meeting record the following:
The performance of the builder Koundouris to rectify the irregularities in the complex have not been satisfactory. This was debated. It was resolved a letter from a solicitor be sent to the builder expressing the concerns of the members carried.
Dr Rushbrook (Unit 5) gave evidence that an external solicitor was not engaged, but that Mr Cecere (Unit 8) undertook to receive documents from other owners so he could draft a letter. Mr Leitch (Unit 9) gave evidence that the owners, at that stage chose to continue dealing with Mr Koundouris at every chance because it seemed the best approach.
On 28 June 2007, the Owners Corporation was given a report by Lewis & Associates, Engineers, as a result of an inspection at Lagani to advise upon water penetration problems. The report observed the following:
(a)at [2.2]: neither the drawings nor the Building File Inspection Reports provide details of the waterproofing undertaken to the walls or the ground floor slabs over the basement carpark;
(b)at [3.1]: that moisture was leaking through the balconies; and
(c)at [6.1] that:
(i)water was leaking into the first floor units through the tiled upper balconies of the units above, as well as around windows;
(ii)the leaks were “the result of inappropriate design and inadequate or failure of the waterproofing arrangements and membranes”;
(iii)the development did “not presently meet the BCA Objective for Damp and Waterproofing, which [was] to protect the building from damage caused by external moisture entering the building”.
On 4 July 2007, Ms Lindsay and Dr Rushbrook (Unit 5) wrote to Mr Koundouris complaining about water damage in Unit 9, attaching photos of the damage, asking for the leaks and the damage to be fixed, and stating:
While it is now just outside the initial warranty period, it would be a shame if its reputation were to be affected through a continuation of the water issues and superficial repairs which have dogged the complex these first five years.
Ms Lindsay's evidence was that on 6 July 2007, Mr Koundouris called her and made comments about the then managing agent.
Mr Leitch's (Unit 9) evidence was that on 10 July 2007, ‘Mark’ from the Koundouris Group (likely to be Mark Jakobasch) called him about access to the balcony of his unit and that men from the “Koundouris Building Group” gained access on 16 July 2007.
Ms Lindsay's evidence was that on 11 July 2007, Mark from Koundouris Projects called her in response to her letter of 4 July 2007 to say that Mr Koundouris had given him the go ahead to do whatever needs doing, and that they would flood the balcony again. Mr Koundouris gave evidence that Mr Jakobasch would have spoken to him after he had spoken to Ms Lindsay.
On 17 July 2007, Koundouris Projects wrote to Unit 5 referring to water problems, but stating that the balconies had been wet-sealed in accordance with Australian standards and that the membrane on the balcony for penthouse Unit 10 had failed due to movement. The letter states:
No defect representations: It is not clear what communication is said to give rise to the November 2001 representation in relation to the windows and doors. The response provided by Koundouris Projects dated 8 November 2001 responded to a complaint relating to leaking windows: see [67](c) above. That did not involve the pleaded representation and it has not been established that the representation, if made, was not correct or that it was relied upon at any relevant time.
The representations relied upon which are alleged to have been made on 17 July 2007 are derived from the letter of the date written to the owners of Unit 5, Ms Lindsay and Dr Rushbrook: see [180] above. That letter was in response to the letter dated 4 July 2007, which itself acknowledged that any claim to rectification was outside “the initial warranty period”. Having regard to the terms of the letter, I am not satisfied that the representations (b), (c) or (d) were in fact made. In any event, it is clear that Dr Rushbrook and Ms Lindsay did not in fact rely upon anything said in that letter. First, it was after Mr Koundouris had sent the letter indicating that he did not consider himself to be liable in relation to building defects. The letter of Ms Lindsay and Dr Rushbrook made it clear that they recognised that the warranty period had expired. Second, the Owners Corporation had in fact received on 28 June 2007 the Lewis & Associate’s report disclosing a significant range of defects and it is clear that the plaintiff and the unit owners relied upon that report subsequently.
The representation in relation to the carpark appears to be a reference to the response provided by Koundouris Projects quoted at [67](d) above. I am not satisfied that this communication amounted to the representation pleaded. In any event:
(a)While in one sense what was said there could be considered to be correct, the author did not address the defect which was being complained about which, I presume, did not relate to water penetration through the open parts of the basement. Any substantive response to the complaint was deferred to Mr Forner’s investigation.
(b)There is no evidence that any representation contained in the response from Koundouris Projects was relied upon.
For these reasons I am not satisfied that the plaintiff is entitled to compensation or damages under the Fair Trading Act 1992 (ACT) or under the Trade Practices Act 1974 (Cth).
Estoppel preventing reliance upon limitation defences
The plaintiff claims in its reply that the making of representations so as to obtain the certificate of occupancy was misleading and that as a result, for a variety of reasons, the defendants are not entitled to rely upon the certificate of occupancy granted at that time. The evidence does not establish what representations were made by Mr Koundouris for the purposes of obtaining the certificate of occupancy. The terms of the 1972 Act place the obligation on the certifier to provide various documents to the Building Controller when the certifier is satisfied that the work has been completed in accordance with the requirements of the 1972 Act and substantially in accordance with the approved plans and that it is structurally sufficient, sound and stable for the purpose for which it is to be occupied or used: 1972 Act, s 40(1). These documents include copies of certificates issued by the certifier in relation to stages of work, structural engineer’s certificates, any application to the certifier under the Act, any approval certificate, determination, notification or permission issued granted or given by the certifier and any certificate or other document given or prepared by another person that the certifier has relied upon for the purposes of giving any such approval certificate, determination, notification or permission. It is those documents which the Building Controller then relies upon in deciding whether to issue a certificate of occupancy: 1972 Act s 53(12). Thus, while it is the owner of the land that must make an application for a certificate of occupancy, the information relied upon appears to be that provided by the certifier. Therefore the plaintiff has failed to establish the making of the representations that underlie the claim that the defendants made representations in November or December 2000 relating to compliance with all relevant standards, codes and statutory requirements.
A broader range of representation is relied upon by the plaintiff in its reply so as to support its contentions that an estoppel by representation or conventional estoppel arose so as to prevent reliance by the defendant upon the plaintiffs delay in commencing proceedings. These estoppels are alleged to relate to the period up until 2006 and then also from 2006 to 2010.
In my view, the critical point is the letter of 19 September 2006. The conduct of Mr Koundouris up to that point was sufficient to generate a reasonable expectation on the part of the unit owners and plaintiff that he was attending to the defects and would take steps which were sufficient to rectify them. However, his letter of 19 September 2006 made it clear that he considered that he was no longer contractually liable for any rectification works. He left open the possibility of further cooperation, but a reasonable reader of that letter would have understood that Mr Koundouris considered there was no binding obligation on him. Having received that letter it would be, in my view, unreasonable for an owner to rely upon his previous course of conduct of attempting to respond to complaints and to remedy defects as indicating that he would continue to do so in the future notwithstanding that he was of the view he had no legal obligation to do so. The owners may have delayed in obtaining independent expert advice and delayed in commencing proceedings, but they were doing so for reasons other than their reliance upon any statements by Mr Koundouris that he had and would remedy the problems.
Damages
The total of the plaintiff’s claim is $1,203,516.18 plus any applicable GST. It was articulated in final submissions as relating to a number of discrete subject matters which I will deal with separately below.
Consistently with my findings
(a)that only the claims by the owners of Unit 8 and Unit 10 are not statute barred,
(b)as to the scope of the unit under the unit titles legislation,
(c)that an individual unit owner may claim in relation to losses incurred with other unit owners through the body corporate,
the approach to assessment of damages must be as follows. The owners of Unit 8 and Unit 10 are entitled to the cost of remedying the defects in their units and a proportionate share of the costs incurred by the Owners Corporation in remedying defects in the common property and the “defined parts” of the building, but not the costs relating to remedying defects within the units of other owners in so far as the areas remedied are not “defined parts” of the building. As may be apparent, this is an exercise which demonstrates the unsatisfactory intersection between the scope of statutory warranties and the provisions of the unit titles legislation. Having regard to the fact that the evidence was not led on the basis of a need to apportion damages as between individual units and as between individual units in the common property, this makes the assessment of damages difficult.
Bathrooms
The plaintiff claims the cost of bathroom waterproofing that has been performed totalling $126,483.40. This amount was arrived at as follows:
(i)work performed to Unit 1 (work performed):$10,750 plus GST;
(ii)work performed to Unit 5 (work performed) $10,900 plus GST;
(iii)Unit 2 (yet to be performed): $24,268.42;
(iv)Unit 3 (yet to be performed): $29,995.83;
(v)Unit 4 (yet to be performed) $29,995.83;
(vi)Unit 9 (yet to be performed): $18,408.34.
The amount identified for Units 2, 3, 4 and 9 are derived from Mr Osenton’s report. Remtech had also quoted $19,940 (plus GST) for the work on Unit 9 on 19 June 2013.
The work undertaken and proposed to be undertaken is a complete reseal of the bathroom, necessitating, a complete reconstruction of the bathroom. Although the experts disagreed as to the extent to which the bathrooms required re waterproofing, they agreed as to the methodology that should be adopted for repairs involving the bath or other areas. Having regard to the report of Mr Stephenson of 26 August 2010 I consider that it is most likely that the area under the bath was not properly waterproofed and that a proper remedial measure would involve installing waterproofing beneath the bath. The costing evidence did not specifically address this option. In my view it is likely to be somewhat more than the lesser option of sealing around the bath and significantly less than stripping the whole bathroom. The former option was costed in September 2010 by Remtech at $3050 (plus GST). Using that figure as a point of reference, I would allow a figure of $5000 per bathroom.
In approaching the matter in this manner I do not accept the submission of the plaintiff that the Bellgrove v Eldridge approach warrants full reinstatement of the waterproofing of the bathrooms. That is for two reasons. First, the Stephenson report of August 2010 identified the most likely location of the leaks. Second, it is not a situation where a number of different and unsuccessful and poorly documents attempts to fix the problem have been made in the past (as was the case with the balconies) which would render any site specific remedy uncertain.
However, as indicated above, damages can only be awarded for items within Unit 8 or Unit 10, or for work on areas outside those units which is property of the Owners Corporation or in “defined parts” of the building for which the Owners Corporation is responsible. The bathrooms of Units 1, 2, 3, 4, 5 and 9 are obviously not within Unit 8 or Unit 10 as they clearly fall on the inner side of the relevant boundary floor or wall for the purposes of the boundaries of unit. They are not common property. Therefore the only way in which the installation of waterproofing in the bathrooms of these units could be the responsibility of the Owners Corporation is if the waterproofing is part of the slab forming the floor of the unit and is one of the “defined parts” of the building.
As pointed out above, slabs form part of the defined parts of the building. Therefore the question becomes whether or not the waterproofing treatment applied to the slab is part of the slab for the purposes of the maintenance obligations in Unit Titles (Management) Act 2001. In the present case the area to which the waterproofing would be required to be installed (under the bath) is an area where tiles were not to be installed. However, in most bathroom areas there would be a cement topping over the slab providing the base for any tiles or other finishes. While there are arguments both ways, in my view the waterproofing is better treated as a part of the slab because it is a functional rather than decorative treatment to the slab and is practically integrated with it. It is distinct from a finish such as tiling or painting. In most cases it will be quite a distinct from such a finish because it is buried under a cement topping within the bathroom. Therefore it is an area the maintenance of which is the responsibility of the Owners Corporation.
Having regard to my conclusions above, the amount for which the Owners Corporation would be liable is $5000 per bathroom, namely $30,000 in total.
Remtech and other invoices
The amount which had been expended by the plaintiff for rectification works, was agreed by the quantum experts, at $768,297.02. This comprised $716,907.02 paid to Remtech and $51,390 of other invoices relating to Scott Schedule items. This amount is set out in the table prepared by the joint experts as being the total of Remtech contract invoices and other invoices that relate to items on the Scott schedule.
From this total must be removed the amounts for bathroom repairs in Unit 1 ($10,750), Unit 5 ($10,900) and Unit 9 ($19,940) which were included in the total.
The scope of works under the contract with Remtech were described in the contract specifications as including:
(a)Spalled concrete repairs;
(b)Debonded render repairs;
(c)Facade crack repairs;
(d)Masonry cracks;
(e)Lightweight cladding repairs;
(f)Facade coating and waterproofing works including steel beam corrosion on balconies;
(g)Balcony waterproofing; and
(h)Roof repairs.
The evidence is not sufficient to establish that the “spalled concrete repairs” and “roof repairs” related to defects for which the builder was responsible. There is no clear way to partition the amounts attributable to these two categories of work. However, it is possible to say that, having regard to the estimate of the reasonable costs of the Scott Schedule items, they are likely to be relatively minor amounts. I will therefore reduce the amount by $20,000 to take account of these works which have not been shown to be as a result of defects caused by the builder.
The total for this category is arrived as follows:
(a)Total $768,297
(b)Less - Bathroom repairs $41,590
(c)Less - Non defect works $20,000
(d)Damages $706,707
Works in each of the areas identified at [584] was either in a common area, on the common area side of the walls or in a “defined part” of the building (most notably walls and balconies). Further, each involved work on “structural elements” of the building as defined in s 24 of the Building Regulation 2004.
Design and professional fees
The amount agreed by the quantum experts for items 2, 8, 10, 13 and 18 as design and professional fees totalled $21,384. These items included the cost of the Lewis & Associate’s report, the cost of Diagnostech drafting those specifications for the remedial work, preparation of contracts, correction to the specification and some consultancy services.
These all relate to the Remtech contract and, notwithstanding the minor limitation on the recovery of the amounts paid pursuant to that contract, these items are in my view proportionally recoverable.
Soleace
The plaintiff claims the amount agreed by the experts for items 36 and 45 in Exhibit 17, the cost of which was identified by reference to quotations totalling $234,620. The two relevant quoted items were as follows:
(a)$196,750 being a quotation by Soleace for waterproofing courtyard areas 1-4, the main entrance courtyard and planter boxes; and
(b)$37,870 being a quotation by Soleace for waterproofing of the western side terrace and the Fawkner Street entrance.
These claims relate to items 67-72 in the Scott Schedule, described by Mr Dunn and Mr Joannides as the “Podium deck waterproofing defect”. In the case of each item the reason for the defect was that water was leaking into the basement. In my view, having regard to the quotations the repairs proposed by Soleace are reasonable ones to remedy the defect.
None of these works relate to Unit 8 or Unit 10 directly. The issue is whether the works are works for which the Owners Corporation is responsible or whether, because some of the works are on the terraces which are within Units 1, 2, 3 and 4, any damages are, to that extent, the responsibility of the individual owners and not the responsibility of the Owners Corporation.
The areas affected by the works are all on the ground level.
(a)The courtyard areas of Units 1, 2, 3 and 4. These are outdoor areas equivalent to the balcony areas on the upper levels. They sit wholly or partly over the basement below. They cannot be considered to be balconies themselves because they are not elevated from the ground.
(b)The main entrance courtyard is the main pedestrian entrance to the building from Elouera Street. It is an area of common property within the building and sits wholly above the basement below.
(c)The western side terrace is an outdoor terrace to which there appears to be no routine access. It sits adjacent to Units 1 and 3 on the western side of the building.
(d)The Fawkner Street entrance is a pedestrian entrance to the building from Fawkner Street. It is on the ground floor between Units 2 and 4.
The works involved installing an affective waterproof membrane over the top of the slab which forms the roof of the basement and the floor of the relevant area. It involved removing the tiles and the tiled beds as well as planter boxes which had been installed, installing a membrane sufficient to link up with the existing membrane on the side walls of the basement then reinstalling the tiles and planter boxes where they had been demolished.
In my view the works were works on “structural elements” of the building for the purposes of the Building Regulation 2004 in that each of the areas affected was an internal or external load-bearing component of the building namely the floor of the building and the roof of the basement.
A more difficult question arises as to whether or not the work was the responsibility of the Owners Corporation or of individual unit owners. That is significant because if it was the responsibility only of the unit owners then no burden will be placed upon the owners of Units 8 and 10 and hence no damages arising from the works recovered in these proceedings.
Clearly enough the work that was undertaken on common property, namely the work on the main entrance courtyard, the Fawkner Street entrance and the western side terrace were all the responsibility of the Owners Corporation. However, the courtyard areas of Units 1, 2, 3 and 4 are all areas which are not common property, but instead fall within the scope of the relevant units.
In relation to those courtyard areas, in so far as the works were undertaken on part of the building which was between a unit and the basement below then, under the provisions of the Unit Titles Act 2001 the boundary between the unit and the common property below was along the centre of the floor, namely, the centre of the slab between courtyard and basement: see [430], [434] above. The waterproof membrane (or the area where it should have been installed) is clearly on the unit side of the centre line of the slab. This conclusion would indicate that the maintenance of that part of the slab which included the membrane was the responsibility of the unit owner.
However, the maintenance obligations of the body corporate extend beyond the common property to the “defined parts” of the building. That phrase includes load bearing slabs: see [434]-[435] above, Unit Titles (Management) Act 2011 s 24(2).
In my view, the obligation to maintain the slab in the common areas includes an obligation to maintain the waterproofing in the courtyard areas because that waterproofing is part of the “slab” for the purposes of the definition of “defined parts” of the building. That is because:
(a)the slab in these areas is load-bearing;
(b)even though the waterproofing does not form part of the monolithic portion of the slab it is, as a practical matter, integrated with and operates as part of the slab; and
(c)it is functionally essential for the effective operation of the slab in order to prevent water penetration through the slab to the common property below.
For these reasons, in my view, the work undertaken by the Owners Corporation in these areas was carried out by it as part of its obligation either to maintain the common property or to maintain the “defined parts” of the building and hence the costs which is incurred would be costs proportionally borne by the owners of Unit 8 and Unit 10.
Basement carpark
The plaintiff claims the cost of rectification and corrosion protection on the basement structural steel. The claim is made based on the evidence of Mr Osenton and totals $54,896.74. This was calculated by applying rates identified by Mr Osenton in relation to item 2 in the Scott Schedule, which related to structural steel elements adjacent to carpark 9 to all steel beams within the basement carpark.
A claim for rectification and corrosion protection on the whole of the basement structural steel was not included in the Scott Schedule. The Scott Schedule item 2 only related to the basement area adjacent to carpark 9. No application was made to amend the claim so as to broaden the claim made.
In relation to item 2, Mr Osenton’s figure was $1877.67 and Mr Elliot’s was $407.22. The difference related to the rate per square metre for the removal of existing coatings and the application of a two part paint system. There was no cross-examination of the quantity surveyors on this issue. Having regard to the limited nature of the work involved, I consider that the costs involved are more likely to equate to those in Mr Osenton’s report and I will allow $1877.67.
Summary
In summary the damages incurred by the Owners Corporation are:
(a)Bathrooms $30,000
(b)Remtech and other invoices $706,707
(c)Design and professional fees $21,384
(d)Soleace $234,620
(e)Basement carpark $1877
(f)Total $964,588
GST
The plaintiff became registered for GST from 1 April 2014. Invoices paid after this date which included GST will give rise to an input tax credit and the plaintiff accepts it has not suffered a loss in respect of GST as it can claim such a credit: Gagner Pty Ltd trading as Indochine Cafe v Canturi Corporation Pty Ltd [2009] NSWCA 413.
Adopting this approach, the amounts for “Remtech and other invoices” and “Design and professional fees” were paid prior to 2014 and therefore an award of damages should include GST on those amounts. That brings the amounts to $777,378 and $23,522 respectively. As for the amount allowed in relation to the repair of waterproofing in bathrooms, only two of those bathrooms have been paid for. They have been paid for by owners rather than by the Owners Corporation. Unit 1 was paid for in May 2015 before the Owners Corporation was registered for GST. Unit 5 was paid for in July 2013 before the Owners Corporation was registered for GST. Having regard to the fact that individual owners have paid amounts which include amounts for which the Owners Corporation is liable, the obligation upon the Owners Corporation includes an obligation to reimburse for GST paid by the owner. Therefore a GST component should be allowed on two of the units, increasing the overall amount for bathrooms by $1000 to $31,000. The other items have not been paid and hence any GST on the amount will be the subject of an input tax credit.
Including the GST amounts brings the various components to:
(g)Bathrooms $31,000
(h)Remtech and other invoices $777,378;
(i)Design and professional fees $23,522
(j)Soleace $234,620;
(k)Basement car park $1,877
The total of these amounts is $1,068,397.
Proportionate liability
The defendants pleaded a defence based on the proportionate liability provisions in ch 7A of the CLW Act. In final submissions, no written or oral submissions were directed to this issue. It was not expressly abandoned.
Relevantly in order to be an apportionable claim the claim must:
(a)be a claim for economic loss or damage to property;
(b)in an action for damages (whether in tort, under contract or otherwise); and
(c)be one arising from a failure to take reasonable care.
What is involved within the concept of “a claim … arising from a failure to take reasonable care” has been the subject of some contention. In relation to the New South Wales provisions (which are relevantly similar), Macfarlan JA has said in obiter dicta that the requirement was only satisfied if “the absence of reasonable care was an element of the, or a, cause of action upon which the plaintiff succeeded”: Perpetual Trustee Co Ltd v CTC Group Pty Ltd (No 2) [2013] NSWCA 58 at [22] (Perpetual Trustee Co Ltd). In the same case Barrett JA suggested a wider enquiry involving determining the nature or quality of the claim by looking at a combination of the terms in which the claim was framed or pleaded and the relevant findings of the court. This was consistent with his Honour’s previous decision at first instance in Reinhold v New South Wales Lotteries Corporation (No 2) [2008] NSWSC 187 at [19]-[30]. Meagher JA did not consider it necessary or appropriate to express any view on the issue: see [36]. Subsequent cases have not had to determine which of these approaches should be adopted: Owners – Strata Plan No 68372 v Allianz Australia Insurance Limited [2014] NSWSC 1807 at [31]; Smart v AAI Ltd [2015] NSWSC 392 at [156].
In the present case I have upheld the plaintiff’s claim only in relation to a breach of the statutory warranties implied into the contracts for sale of Unit 8 and Unit 10 under the 2004 Act. Recovery for breach of those warranties is not contingent upon establishing a failure to take reasonable care. Having regard to the absence of argument on the issue, it is unnecessary to form a concluded view as to which of the alternative approaches identified in Perpetual Trustee Co Ltd should be preferred. Adopting Macfarlan JA’s approach would clearly preclude the operation of the provisions. Adopting Barrett JA’s approach would preclude the operation of the provisions having regard to the manner in which the statutory warranty claims were framed and my findings in relation to them.
For these reasons I do not consider that the proportionate liability defence is made out.
Damages recoverable via owners of Unit 8 and Unit 10
Because the damages recoverable are only recoverable by the plaintiff in so far as they involve the assigned right to damages owed to the owners of Unit 8 and Unit 10, the amount at [609] above must be adjusted so that it reflects the liability of the owners of Units 8 and 10 to pay the costs incurred or to be incurred by the Owners Corporation. That is dependent upon the number of units in the units plan attributable to Unit 8 and Unit 10. Only part of the units plan was in evidence and that part did not disclose the unit entitlement of Unit 8 and Unit 10. Having regard to the fact that my interpretation of the operation of s 58C of the 1972 Act and s 88 of the 2004 Act did not correspond with the primary contentions of the plaintiff for the defendants, I consider it appropriate to give the plaintiff an opportunity to apply to reopen its case so as to tender a copy of the units plan and hence permit an award of damages on the basis outlined in these reasons.
Orders.
The orders of the Court are:
1. The proceedings are listed on 8 June 2016 at 3pm for the making of orders to give effect to these reasons, and, if necessary, any application by the plaintiff to reopen its case to tender a copy of units plan no 1917.
2. In the event that the parties do not agree on the orders required to give effect to these reasons, they have liberty to file and serve an outline of their submissions no longer than three pages in length including the orders for which the party contends.
| I certify that the preceding six hundred and sixteen [616] numbered paragraphs are a true copy of the Reasons for Judgment of his Honour Associate Justice Mossop Associate: Date: 13 May 2015 |
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