(a) June 2008 to February 2009 - The Purchase and Initial Investigation
19Prior to purchasing her apartment Mrs Fligg made reasonable efforts to ascertain whether anything in the strata records should deter her from her purchase. Her pre-purchase Strata Inspection Report revealed that there were issues with the maintenance of the building going back to 2002, but there was no record in the strata scheme's files of any defect relating to Apartment 73. Nor did Mrs Fligg see any damage to the apartment during her pre-purchase inspections. She exchanged contracts on 15 May 2008, completed her purchase on 11 June 2008, and moved in a few days later.
20The apartment is located on Level 14 of what is a sixteen level building. The precise address of the building on Alfred Street, Milsons Point is not published in these reasons in order to reduce the risk of identity theft. The apartment has three-bedrooms and a large balcony, opening out from the west facing living room, and with a smaller south facing balcony opening off the main bedroom and a dining room. The difference between the two balconies is important, because the water penetration associated with each one needed to be separately remedied. Problems persisted with the smaller southern facing balcony for longer than they did with the larger western facing balcony.
21Within days of her purchase Mrs Fligg realised all was not well with her apartment. She found that the carpet adjacent to the balcony doors of both the southern and western balconies had been replaced to a distance of about 60 centimetres from the sliding doorways, apparently to replace water damaged carpet.
22After she moved in Mrs Fligg found that the first rainstorm resulted in substantial water penetration from the western balcony into her apartment. Mrs Fligg saw that water was coming into the apartment from the living room balcony, that the walls around that balcony were damp and water had penetrated along the entire length of the carpet along the sliding door leading to the living room balcony.
23Mrs Fligg consulted her solicitor, Mr Abbott of Jonathan Abbott & Associates of Dural, who wrote to the Strata Managers for the building, Mssrs Bright & Duggan Pty Ltd ("Bright & Duggan") on 18 June 2008. Mr Abbott's letter is a contemporaneous record of Mrs Fligg's earliest experience of water penetration in Apartment 73. It complains of "water damage to her carpet in the living room, which seems to have arisen from water penetrating in from the balcony" and alleges "carpet is damaged and will need a replacement" and that "the stonework is also soft at the entrance which would indicate there is some water logging". The letter flags very early that Mrs Fligg seeks the repair of those problems and the replacement of the carpet.
24Mrs Fligg was given a claim form, which she lodged with the caretaker, Mr Ray Ristuccia (a building manager employed by the Building Management Service Company then providing services to the defendant, High Rise Engineering Maintenance Pty Limited).
25The problems in the apartment continued. The Owners Corporation and the Strata Manager did nothing in the short term directly to rectify them. The Owners Corporation was involved in other larger scale investigations of problems (including water penetration issues) in the whole building at this time through Savills Proect Management Pty Limited ("Savills") and Taylor Thompson Whitting NSW Pty Limited ("TTW"). But none of the their investigative work led to remedial work in Mrs Fligg's Apartment 73, before March 2009.
26Mrs Fligg realised how serious a matters the water problem was, as a result of events on 28 July 2008. Early that morning, a period of very heavy rain, caused serious flooding to the apartment. Water penetrated into the living room from the balcony and soaked the carpet in from the balcony door by about 2 metres. Mrs Fligg was up until 1 am placing towels at the balcony entrance to the living room to prevent the whole room becoming flooded. Two days later, on 30 July 2008, Mr Abbott wrote again to Bright & Duggan alerting the Strata Manager to the intensity of this inundation and the penetration of water into the living room. Thus, about six weeks after settlement Mrs Fligg's solicitor had identified her main concern, water penetration from the west into her living room area.
27But by this time Mr Abbott, in consultation with his client, had also done some spadework in order to suggest to the Owners Corporation what might be a source of the problem. He had discovered from the strata records that from November 2003, about five years earlier, as his correspondence asserted, "extensive work was carried out to the unit above our client's unit, being lot 116". This work involved enlargement of the balcony above, the relocation of the external wall, incorporating an existing balcony into a bedroom on level 15, removal of balcony tiles and the re-tiling of the balcony area. Mr Abbott made a number of reasonable suggestions to broaden the Owners Corporation's ideas about the possible source of the living room water penetration and to help obtain recovery of compensation for Mrs Fligg in the short term:-
"It may well be that this work was defective in that proper drainage requirements were not met. The owner of Lot 116 may well have a right to claim against the builder who carried out that work. What is abundantly clear however is that it is untenable for Mrs Fligg to have to continue to endure flooding in her unit when it rains. She is elderly and these issues are adversely affecting her health.
We need hardly point out that Mrs Fligg is entitled to the quiet use and enjoyment of her unit and this is being disrupted in the extreme by the water penetration problems which would seem to emanate from the unit above.
We make the comment in passing that not only would it be of serious concern for the integrity and safety of our client's unit should water penetration, water logging and, potential, softening of the formwork continue into the future but it should also be of great concern to the unit owner above our client who clearly relies from support from below."
28Shortly after the major flooding event of 28 July 2008, Mrs Fligg first noticed one of two other persistent problems with Apartment 73, in addition to water penetration from the western living room balcony. Well after the rain had stopped Mrs Fligg noticed water continuing to leak down the balcony door, as though from a reservoir of water above. This left a white residue on the door which could not be removed, even with tradesmen's assistance. Mr Abbott drew the Strata Manager's attention to this residue, which was a lime or calcium deposit. The Building Manager, Mr Ristuccia and the building caretaker visited the unit a number of times. But they did not give Mrs Fligg any commitment that anything would be done to correct the water penetration problems.
29On 19 August 2008, the first reply correspondence from the Owners Corporation, took no responsibility for the problem but blamed Mrs Fligg. The Owners Corporation advanced the hypothesis that Mrs Fligg or a previous occupant had caused the "external sliding door weep holes to be deliberately blocked with a sealant" and therefore rainwater "builds up in the cavity until it overflows into the apartment interior". The Owners Corporation suggested to Mrs Fligg that she should have the external sliding door weep holes unblocked.
30Mrs Fligg was understandably disheartened by this communication. She says, and I accept, that she saw no point in re-carpeting the unit and that she would arrange for her own building inspection. In restrained terms Mr Abbott told Bright & Duggan on 10 September that their communication of 19 August was unsatisfactory. Mr Abbott pointed out that no attempt was being made, "to have an independent builder actually inspect the balcony above and our client's balcony to establish where the real issues lay and how they might be best fixed". This independent builder was Mr John Worthington, whose fees are still in dispute in the proceedings. Mr Abbott requested the Owners Corporation, "would you please make a genuine attempt to come to terms with this issue" and foreshadowed that as a result of the Owners Corporation's failures Mrs Fligg would arrange her own builder to examine the problems and their causes and report back to the Owners Corporation with respect to recommend remedial measures.
31Despite what was happening elsewhere in the building, in my view, given what Mrs Fligg had been told and what she faced, her decision at this time to engage Mr Worthington, an independent builder, was reasonable. It was a coherent and proportionate response to the Owners Corporation's dealings with her up until that point. The Owners Corporation's perspective on this period will be given later.
32Another important water related defect in Apartment 73 came to Mrs Fligg's attention, in October 2008, when she noticed that water was also coming into her bedroom and the dining room from the southern balcony.
33Mrs Fligg says, and I accept, that in late 2008 or early 2009 she filled in a form and lodged it with the caretaker's officer, specifically complaining about the water problem emanating from both the western and southern balconies. She was mainly concerned about the level of water damage in the living room area because it was worst in that area and she was exasperated by the continuing run off from the wall above. It was her impression that a ledge above the window and door on the western side and below the apartment above on level 15 where prior works had taken place, allowed water to gather and then overflow down the wall. But nothing was done by Christmas 2008.
34In early 2009 the Executive Committee of the Owners Corporation reported to an extraordinary general meeting about the engagement of a building company specialising in water penetration, Watergate, which had been engaged to fix water penetration problems in a number of balconies in the building. A member of the Executive Committee, Mrs Jane Campbell, visited Mrs Fligg's unit and made observations about the extent of the problem there. Mrs Campbell's email reproduces her immediate reaction to what she saw. In the email she reported to the whole Executive Committee and looked forward to action on the 2 March:-
"Hello
I have just been into May's apartment. Not for business, but I am now making it so.
The rain, once again, has entered May's apartment. The water is coming in from the balcony. More than two feet (depth) of her lounge room carpet is ruined. May has hired engineer who says it is because the balcony level is the wrong height in relation to the floor. He is more than willing to speak to the committee, and I have asked him to put in writing as well.
It is a disgrace. No-one should have to put up with wet and smelly skirting boards is relatively minor but something that needs to be fixed as well as they will only get worse. Fortunately (for the committee as much as May) the afternoon sun does help to reduce the mould.
Everything seems to come back to the pediments. This is not a pediment problem. We need to get it(and other apartments) fixed as they are only going to get worse.
I hope the meeting on 2 March will bring a decision instead of the continued circles.
Regards,
Jane"
35Much can be drawn from this email. It informs the Committee that Mrs Fligg has already hired Mr Worthington; it invites him to communicate with the Executive Council; the author's reaction to the last nine months of the apartment in the present condition was, "it is a disgrace"; and, the lack of resolution up to that time, despite the contact between the parties that had taken place, was described in her words as "continued circles". Mrs Campbell said in evidence that she does not recall looking at Mrs Fligg's southern balcony at this time. That is probably correct as the main ingress of water at that time was from the western balcony area. But once that was mostly fixed in early 2010, residual problems with the southern balcony came into greater focus.
36Mrs Fligg did have a report by then from Mr Worthington, his report dated 3 February 2009. She had already made this report available to the building caretaker. Mrs Fligg had engaged Mr Worthington before the Executive Committee acted to retain Watergate to do repair work to the building generally. It is not necessary to reproduce Mr Worthington's report in these reasons, but it clearly identifies the three areas of water penetration that were troubling Mrs Fligg: (1) water penetration from the large balcony to the west into the living room; (2) water penetration from the southern balcony into the bedroom and dining room; and, (3) calcium staining on the living room windows apparently from the accumulation of water in the area of the unit above. Mr Worthington included photographs and clear descriptive findings about each of these problems. Mr Worthington concludes that "further investigation should be carried out and the balconies [should] be water tested".