Owners Corporation 1 Plan No. PS707553K, Andrew Michael Markovics, Robert Charles Barker, Karen Adrienne Barker, Tamara Briggs, Corvette 64 Pty Ltd (ACN 156 004 241), Suzanne Godfrey, Bindy Aviva Cohen, Leon Britbart, Leonard Harold Swidler, Jack Gutman, Tracy Majman

Owners Corporation 1 Plan No. PS707553K v Shangri-La Construction Pty Ltd (Building and Property_)_ [2022] VCAT 400

Orders will be made after discussion of draft proposed orders with the parties.

1. to give directions as to the hearing of the proceeding and further interlocutory steps where necessary;
2. to consider the summons dated 29 March 2022 issued by the second and third joined parties ("the surveying parties"). The summons sought orders that the hearing date be vacated and be relisted after September 2022 and further interlocutory directions.

2 The proceeding is part of the second tranche of cases recently referred for hearing by a Vice President pursuant to the Protocol dated October 2021 between the County Court Commercial Division and the VCAT Civil Division.

3 The proceeding was set down for hearing at VCAT on 16 May 2022 before a Senior Member. The proceeding was referred for hearing by a Vice President because a Senior Member was not available. Cases referred earlier pursuant to the Protocol had previously been set down in the second half of May 2022. It was therefore necessary for the Vice President to clarify with the parties whether the proceeding was ready to be heard by a Vice President on or shortly after 16 May 2022.

4 At the same time, the surveying parties' summons raised similar issues, as it was alleged that the respondent ("the builder") had not yet filed and served a properly particularised claim for contribution against the building surveyor parties.

5 At the conclusion of over two hours of discussion on 30 March 2022, the hearing was adjourned to give the parties the opportunity to file written submissions and/or affidavits in relation to the matters discussed. These included:

1. whether the builder had filed an appropriately particularised defence and/or claim in respect of:
   1. the surveying parties;
   2. the fourth and fifth joined parties ("the fire services parties");
   3. the ninth and tenth joined parties ("the plastering parties").
2. how long it would take for the builder to prepare and file properly particularised defences and claims in respect of those parties;
3. whether it were possible to conduct a hearing, either of all matters in dispute, or more limited issues, if the hearing were to proceed on or about 16 May 2022;
4. whether, in order for the hearing to proceed on or about 16 May 2022, the builder's defence and/or claims in respect of the surveying parties and the fire services parties should be struck out;
5. whether the builder's claim in respect of the plastering parties could proceed on 16 May 2022 without amendment to limit the claim to "Item 13" referred to in the claim or to other properly particularised claims that the builder might introduce without unfairness to the plastering parties;
6. what further orders are necessary to ensure that the proceeding is resolved speedily and fairly;
7. whether the parties wished to have the hearing resumed in order to make further oral submissions.

6 The proceeding relates to the construction of a development of 10 apartments at 290 Hawthorn Road, Caufield. The apartments were constructed by the builder between July 2014 and September 2015. The proceeding was commenced in early 2019. The applicants are the owners' corporation and apartment owners ("the owners"). The applicants allege that the builder constructed the apartments in a defective manner. The primary issues of defective work relate to the ingress of water due to inadequate waterproofing and non-compliant cladding, and fire isolation. The applicants claim damages for the cost of rectification works and dislocation costs in excess of $2 million.

7 During the course of the proceeding, the builder has sought to apportion responsibility for the applicants' loss and damage with a number of other persons involved in the project. The only relevant remaining joined parties are those to whom I have previously referred as the surveying parties, the fire services parties and the plastering parties.

Builder's articulation of claims against these parties

8 There have been lengthy delays in the proceeding, which are apparent from the orders previously made at VCAT:

1. 10 April 2019 - the owners' amended points of claim with "fully itemised particulars of the claim, loss and damage" to be filed by 16 April 2019, the exchange of experts' reports and the filing of the builder's defence by 14 June 2019 (this date was later extended to 30 June 2019);
2. 2 August 2019 - the dates for the exchange of experts' reports was extended to September (owners) and October (builder);
3. 8 October 2020 - the owners' further experts' reports and an amended claim with updated particulars of loss required by 21 December 2020 with the builder's defence and expert reports by 9 March 2021 and any joinder applications by 7 April 2021;
4. 13 April 2021 - the owners to file further amended claim by 12 February and builder its defence and expert evidence by 4 June 2021. The proceeding was listed for final hearing at VCAT on 16 May 2022.
5. 7 July 2021 - the Tribunal noted the builder's failure, despite two previous orders on 8 October 2020 and 9 March 2021, to file any application to join further parties. The times for the builder to file documents were extended to 8 October 2021, including:
   1. defence - otherwise the proceeding would be determined in the applicants' favour with damages to be assessed;
   2. expert reports;
   3. application to join parties.
6. 26 October 2021 - the owners to file numbered, referenced defects list by 3 November 2021. Builder must by 20 November 2021 file its proposed amended defence with "full particulars" of "apportionment of responsibility" of any concurrent wrongdoer and proposed claims against further parties "setting out full particulars".
7. 9 December 2021 - the second to fifth joined parties were joined as parties to the proceeding. Each group of joined parties was required to file their defences to the builder's claims by 21 February 2022. The builder was not permitted to assert in its defence that the second joined party was a concurrent wrongdoer. The hearing date of 16 May 2022 was confirmed and further directions were made about expert reports, discovery and witness statements.

9 The builder had filed a defence dated 7 October 2021. A further proposed defence dated 20 November 2021 was filed. In paragraph 19ff, the builder claimed that the owners' claim against it was "an apportionable claim as defined in section 24AE of the Wrongs Act".

10 The builder pleaded in paragraphs 20, 21 and 23 that the surveying parties were "liable to the applicants [owners] in negligence and for breach of contract" (the second joined party), in negligence (the third joined party) and for misleading and deceptive conduct (both the second and third joined parties). It is the particulars of these paragraphs which the builder provided (essentially the same in each case) which are, arguably, deficient and should not be allowed to stand in their present form.

11 The deficiencies of the particulars are as follows:

1. the builder purports to rely generally and without any specificity on documents completely separate to the pleading, including:
   1. the 10 expert reports listed by the owners' amended points of claim dated 21 February 2021;
   2. the builder's proposed points of claim against the surveying parties dated 20 November 2021;
   3. the 30 pages of the owners' summary of defects and costs dated 5 November 2021 which have been simply copied into the defence as part of the particulars to paragraph 20, and incorporated by reference in paragraphs 21 and 23;
2. no attempt has been made to identify which of the allegations (incorporated by reference to these external documents as the totality of the claims made by the owners against the builder), has any relevance to the surveying parties in the performance of any responsibilities they may have had in relation to the project;
3. it is obvious from the 30 pages copied from the owners' summary of defects that many of the items can have no relevance to the responsibilities of the surveying parties. For example, the allegation that the builder used non-fire rated cladding instead of the fire rated cladding specified by the contract documents approved for construction in the issued building permit, cannot, without something further, give rise to any liability on the part of the surveying parties.

12 The pleading in the builder's defence concerning the fire services parties' liability to the owners in negligence is in similar form as the particulars of the various allegations in relation to the surveying parties. Accordingly, the particulars of the separate claims made by the builder against both the surveying parties and the fire service parties suffer from the same defects and, in my view, should not be allowed to stand in their present form.

13 The present state of these documents is entirely unsatisfactory. It is clear that the documents were prepared without the builder engaging an expert with either building surveying or fire services expertise. The builder's counsel, Mr Stanistreet, informed the Tribunal during the hearing that before the builder could redraw the documents, it would need to engage a surveying expert and that the report from that expert would also provide the necessary information to particularise the pleadings involving the fire services parties.

14 I am referring to these documents as "pleadings" as convenient shorthand. The deficiencies are not technical shortcomings that often complicate the finalisation of pleadings in a court proceeding. In fact, VCAT claims are often particularised by specific reference to an expert's report that has been separately provided. Usually, however, the VCAT Practice Notes ensure that such reports follow a standard format. Alternatively, as with the attempt by the owners to particularise their claims against the builder by reference to numerous reports, an order was made requiring the owners to file and serve a numbered, cross-referenced defects and quantum list.

15 The basic deficiency with the present particularisation of the builder's defence and claims is that it directs the opposite party to a mound of material without any attempt to identify what is actually the substance of the detail of the claim the owners or the builder would separately have against each set of joined parties. This puts an impossibly onerous burden on the opposite parties to sift through substantial material to attempt to understand what might possibly be alleged against them, and then to attempt to answer the allegations.

16 The problem with the builder's claim against the plastering parties is simpler. It is not alleged by the builder that the plastering parties are concurrent wrongdoers. The builder simply makes a claim for contribution against them. However, in the particularisation of the claim, the builder refers to the claim in general terms and then uses the conjunction "including" before specifically referring to item 13 in the owners' defects list against the builder.

17 Mr Stanistreet informed the Tribunal that he understood that item 13 was in fact the only matter in respect of which the builder sought contribution from the plastering parties. If that is the case, the amendment of "including" to "being" would clarify this matter. Otherwise, if the builder intends to pursue contribution in respect of other claims, those claims must be identified precisely and with sufficient particularity.

Time sought by the builder to provide proper particulars

18 Mr Stanistreet informed the Tribunal that, if the builder were to provide a particularised defence and separate claims in relation to the surveying parties and the fire services parties, the following steps are necessary:

1. the builder wants discovery from the surveying parties of certain matters. I was informed that the second joined party is the corporate entity which provides surveying services. The third joined party is the individual who was nominated to be appointed the surveyor for the purposes of the issue of a building permit for the project. However, the occupancy permit dated 8 September 2015 was issued by Sokratis Kromidellis as the surveyor.

Mr Stanistreet requested that discovery be required from the two existing surveying parties of "all documents relating to the engagement and/or involvement of Jim Tsaganas and Sokratis Kromidellis as the nominated surveyor for the granting of building permits for the 290 Hawthorn Road Caulfield project in 2014 and 2015". Mr Stanistreet submitted that this discovery was necessary in order for the builder to consider whatever is also necessary to join Mr Kromidellis as a party to the proceeding.

Although this request would be more appropriate for pre-action discovery to ascertain the identity of an appropriate party, the surveying parties' counsel, Mr Sedel, anticipated that this task could likely be completed in between 2 and 4 weeks;

1. the respondent wishes to engage a surveying expert, Mr du Chateau, to advise it on the matters relating to the surveying parties', and Mr Kromidellis', liability to the applicant and itself. The respondent's solicitor, Mr Prior, stated in an affidavit that Mr du Chateau had advised he would not be able to commence working on the matter for about 8 weeks. Mr Stanistreet informed the Tribunal that Mr du Chateau anticipated that it would take a further 12 weeks to prepare a report;
2. Mr Stanistreet also told the Tribunal that it would take a further 3 weeks before the further amended defence and the claims against the surveying parties (including, if appropriate, Mr Kromidellis) and the fire services parties could be served.

19 The total foreshadowed period is about 6 months. It would then be necessary for the surveying parties and the fire services parties to obtain their own expert opinion if they wished and to prepare and file defences to the amended claims made by the respondent against them. Further time would be needed for the completion of interlocutory steps including discovery and, perhaps, the preparation of witness statements, before a hearing of the proceeding could commence. This would most likely cause a delay until early 2023 before that could happen.

20 No party has requested a further hearing to make oral submissions. Written submissions have been received from the applicants, the builder, the surveying parties and the plastering parties.

21 The written submissions address the following issues:

1. the adjournment of the hearing on 16 May 2022;
2. the prejudice to the applicants if the hearing does not proceed on that date;
3. the adequacy of the present articulation of the builder's claims against the surveying parties and the fire service parties;
4. the time it will take for the builder to prepare a properly pleaded defence and claims relating to those parties and the plastering parties;
5. whether the hearing on 16 May 2022 could proceed on a limited basis;
6. whether any basis presently exists to strike out the proposed claims by the builder against the surveying parties and the fire services parties.

22 The owners oppose any adjournment of the hearing on 16 May 2022, although they recognise that because of the inadequacy of the builder's claims against the surveying parties and the fire services parties, the hearing would only be able to deal with limited matters.

23 The builder seeks to have the hearing date vacated and not refixed until the necessary procedural steps are completed.

24 The surveying parties would prefer the claims against it to be struck out. However, they stated they will consent to the scheduled hearing on 16 May 2022 being "vacated and a new timetable set".

25 The plastering parties' preference is "for the matter to be adjourned and costs orders made in [their] favour".

Prejudice if the hearing does or does not proceed

26 The owners say that if the hearing is adjourned, the case would not be determined until 2023. An affidavit by Stuart Wellington, a director of the owners corporation services provider, states that the vacation of the hearing date "will cause the applicants tremendous financial hardship due to a delay in paying down the interest only loan" to fund borrowings to rectify the builder's defective workmanship at a cost of $2,568,134.20 and other financial outgoings including legal costs, the cost of alternative accommodation and storage for owners occupiers or loss of rental for owner investors for about 12 months from April 2021 to April 2022.

27 The builder states that "there is no particular prejudice to the applicants, who have borrowed to complete the rectification works", which the builder suggests is not a "pressing need for the matter to be heard". On the other hand, "it would greatly prejudice [the builder] for it to potentially face a multi-million dollar judgment against it, but be delayed or precluded from pressing its apportionment and contribution claims concurrently with its defence".

28 No cogent explanation has been offered by the builder as to why it failed to comply with Tribunal orders after April 2021 and took no real steps to properly articulate its claims or prepare for the hearing after the hearing date was fixed by orders made on 13 April 2021.

Whether the hearing on 16 May 2022 could proceed on a limited basis

29 In their submissions, the owners repeated submissions they made on 31 March 2022 as to how a hearing might be limited to determining the extent of the owners' damages whilst issues of apportionment and the builder's claims against the surveying parties or the fire services parties are deferred to a further hearing.

30 The builder submitted that it was inappropriate to split the hearing. The surveying parties said that they "strongly oppose[d]" the owners' submissions on a split trial. A split trial would involve them in significant legal costs (estimated at $115,000.00) without any determination of issues involving them.

Whether there is any basis to strike out the builder's claims

31 The owners do not address this issue in their submissions. The builder submitted that no circumstances presently exist for the exercise of any power the Tribunal may have to strike out its claims without an adjudication on their merits.

32 The surveying clients suggest certain "mechanisms" by which the Tribunal might "dismiss all allegations, defences and claims relating to the surveying parties".

33 At present, there is no submission in support of maintaining the hearing date of 16 May 2022 for the purpose of determining all matters in issue, including the owners' claims, the apportionment defences of the builder and its claims against the joined parties.

34 The owners' proposal for limiting the trial is unrealistic. It would result in added expense and uncertainty without any tangible benefits. On the authorities, if any party made an application to split the hearing in this way, it would inevitably fail.

35 There is no application by a party that the claims by the builder against the surveying parties or the fire services parties be dismissed. Those parties originally, by their summons, sought the vacation of the hearing date and whilst they would accept the dismissal of the builder's claims against them, they are prepared to consent to an adjourned hearing and a further timetable to ensure the claims against them are properly articulated.

36 It is unfortunate that the hearing cannot proceed on 16 May 2022 and that there will be further significant delay before this case can be heard. The delay in resolution of the proceeding will prejudice all the parties, particularly the applicants.

37 The builder has failed in the following respects:

1. it failed to comply with a number of orders relating to the joinder of parties and the pleading of claims against them; and
2. it prepared inadequate claims against the joined parties and did so without itself consulting an appropriate expert.

38 The proceeding is not ready for hearing on about 16 May 2022. The parties' further submissions simply confirm this fact. Unfortunately, the hearing must be refixed at a later date to allow further interlocutory steps to be completed, initially, by the builder, and then by the other parties.

39 It is proposed, therefore, to vacate the hearing date of 16 May 2022 and to give directions as to the amended pleadings the builder must deliver. The matter will then return for a further directions hearing. The parties were informed by email yesterday afternoon that this course would be followed, and they were provided with draft proposed orders which it was anticipated would be discussed following the delivery of these reasons.