Owners Corporation PS628502Y v 4S Constructions Pty Ltd (Building and Property) [2025] VCAT 977 (31 October 2025)

Domestic Building Contracts Act 1995 (Vic): claim by owners corporation for damages made against builder for breach of warranties under s 8 of the Domestic Building Contracts Act 1995 (Vic); since date of hearing the first named respondent (builder) has gone into liquidation; Tribunal still may publish final orders: see Owners Corporation PS623721 v Shangri-La Construction Pty Ltd (Final Orders Defects) [2023] VCAT 501, [10];standing of the Owners Corporation as registered proprietor of the common property as proper party to bring claim for defects in the common property confirmed, following Body Corporate No 1/PS40911511E St James Apartments v Renaissance Assets Pty Ltd (2004) 11 VR 41; [2004] VSC 43; as the OC had undertaken all necessary rectification works, the observation of Meagher JA of the New South Wales Court of Appeal in Hyder Consulting(Australia) P/L v Wilh Wilhelmsen Agency P/L & Anor [2001] NSWCA 313, [86].that 'It seems almost too simplistic to point out the actual cost was an impeccable alternative method of calculating cost' applied.

4S Constructions Pty Ltd (ACN 083 248 122)(In liquidation)

Owners Corporation PS628502Y v 4S Constructions Pty Ltd (Building and Property) [2025] VCAT 977

1. The respondent must pay the applicant damages in the sum of $2,869,892.65.
2. As the first respondent is in liquidation, no further step in the proceeding can be taken against it by a party without leave of a court of competent jurisdiction, and no costs application will be allowed unless such leave is granted.
3. The proceeding is referred to an administrative mention on 28 November 2025 by which date the applicant must advise the Tribunal whether it proposes to seek leave to proceed.

Note: it is not necessary for the parties to attend at the Tribunal for the administrative mention.

1. The principal registrar is directed to send a copy of these Orders with Reasons to the parties.
2. The principal registrar is also directed to send a copy of these Orders with Reasons to the liquidators of the first respondent Nicholas Giasoumi and Shane Leslie Deane of Dye & Co Pty Ltd at: nicholas@dyeco.com.au.

1. This proceeding came on for final hearing before us on 7 and 8 July 2025.
2. On 20 August 2025 the Tribunal received advice that on or about 1 August 2025 the first respondent, 4S Constructions Pty Ltd (ACN 083 248 122) ('the Builder'), was placed in liquidation pursuant to a creditors voluntary winding up.
3. Because the Builder was placed in liquidation, a stay of the proceeding has come into effect.
4. However, this does not prevent us from publishing orders: see Owners Corporation PS623721 v Shangri-La Construction Pty Ltd (Final Orders Defects).[1]

1. In about 2011**,** the Builder constructed a residential development at 2-4 Hutton Street Dandenong, Victoria ('the Property') under a major domestic building contract ('the Contract') for developers named E & M Farag Pty Ltd. The development was substantial, comprising a ground floor car park and four storeys above containing 31 apartments and common property.
2. Construction began after a building permit was issued in May 2008, and an occupancy permit was issued in March 2011. In April 2011, Plan of Subdivision PS 6282Y, was registered.
3. The first applicant, Owners Corporation PS628502Y ('the OC'), is the registered proprietor of the common property ('the Common Property'). The OC has come to the Tribunal seeking damages from the Builder for breaches of warranties created by of the Domestic Building Contracts Act 1995 (Vic) ('the DBC Act'). A key defect in the building was that it had been constructed using Expanded Polystyrene ('EPS') combustible cladding. Because of the fire risk it created, the EPS cladding had to be removed and replaced. This work was undertaken by Cladding Safety Victoria which expended more than $1,300,000 in rectifying the cladding.
4. The State of Victoria ('the State') has exercised its right of subrogation under s 134F of the Building Act 1993 (Vic) in respect of the combustible cladding, and for this purpose joined a director of the Builder, Mr Emad Farag as second respondent. The State settled its claim against the Builder and Mr Farag in the week before the hearing started, with the result that the State and Mr Farag took no part in the hearing. The claim against the Builder pressed at the hearing by the OC was limited to defects other than combustible cladding.

1. The only respondent pursued by the OC was the Builder. The Builder, on 2 March 2023, brought into the proceeding as joined parties both the Relevant Building Surveyor, BCG (Aust) Pty Ltd (ACN 114 332 017) atf BCG Unit Trust ('the RBS'), and the architectural draughter, Callby Pty Ltd (ACN 060 520 818) t/as John Anthony Garofalo Design Consultant ('the Designer'), who had prepared the design and the building permit documentation for the apartment building.
2. What happened after this was conveniently summarised by Member Kincaid in the preamble to his orders made in this proceeding on 6 July 2023, as follows:

(a) On 6 March 2023, the Honourable Justice Delany, Acting Member, handed down the ruling in Vaughan Constructions Pty Ltd v Melbourne Water Corporation (Building and Property) [2023] VCAT 233, determining that the VCAT had no jurisdiction determine contribution claims under the Wrongs Act 1958 (Vic) ('the Wrongs Act').

(b) Thereafter, the Builder accepted this Tribunal had no jurisdiction determine its proposed contribution claim. However, by paragraph 39 of its Points of Defence to the State's claim in this proceeding, the Builder alleged that the claim made by the State is an apportionable claim under the Wrongs Act and that the Building Surveyor and the Designer were concurrent wrongdoers.

(c) On 2 June 2023, the Builder and Mr Farag issued Supreme Court Proceeding S ECI 2023 02353 (the 'SCV Proceeding').

(d) In the SCV Proceeding, the Builder and Mr Farag (as the plaintiffs), sought various forms of relief against, inter alia, the RBS and the Designer, including a declaration concerning apportionment and a claim for contribution under the Wrongs Act.

(e) By application made 9 June 2023, the Designer sought orders that it be removed from this proceeding on the basis the claims made by Mr Farag were not apportionable claims and therefore paragraph 39 of the Defence ought to be struck out, and thereafter there would be no further reason for it to remain party to this proceeding in the Tribunal.

(f) The RBS supported the proposition that the claims made by Mr Farag in this proceeding were not apportionable claims.

The action continued without the joined parties

1. The action continued after the RBS and the Designer were removed from the proceeding in July 2023. The OC and the State remained the applicants, and the Builder and Mr Farag were the only respondents. These parties remained in the proceeding at the commencement of the hearing.

1. The hearing began before us on 7 July 2025. At the outset, Mr D R Diaz of Counsel instructed by Ms C-L Knight, announced his appearance for the OC. Mr R Kalenderian, a solicitor, appeared for the State. There was no appearance for the Builder but Ms A Storey of Counsel instructed by Mr A Ghabrial, announced an appearance for Mr Farag.
2. We were informed that the State had settled with the Builder and Mr Farag. On this basis Mr Kalenderian was excused. Ms A Storey and Mr A Ghabrial confirmed that they had no instructions to remain to represent the Builder at the hearing, and they too were excused.
3. The fact that the Builder was unrepresented had a dramatic impact on the running of the hearing. It had been anticipated that each of the witnesses to be called by the OC would be cross-examined by the Builder, and that the builder would be presenting its own evidence.
4. On this basis, the plan for the conduct of the hearing prepared by Mr Diaz on behalf of the OC contemplated the hearing running into a second week. In the event, the hearing was concluded in two days, because although each of the witnesses which the OC planned to call were in fact called, they were not cross-examined.

Defects identified in Building Order and Building Notices

1. Building defects were first identified in an initial Building Notice issued by the Municipal Building Surveyor ('MBS') of Greater Dandenong Council ('GDC') as the Responsible Authority. This was followed by Building Orders and Notices from both the GDC and the Victorian Building Authority ('VBA'). These notices and orders ('the Notices and Orders') are as follows:
   • Building Notice, GDC, 9 February 2015[2]
   • Building Notice, GDC, 8 January 2018[3]
   • Building Order (RS-225 BOMW 01/19) - Minor Work, VBA, 4 March 2019[4]
   • Building Order (RS-225 BOMW 02/19) - Minor Work, VBA, 4 March 2019[5]
   • Building Notice (RS-225 BN 01/19), VBA, 5 March 2019[6]
   • Building Notice (RS-225-BN-002), VBA, 28 May 2020[7]
   • Building Order (General) (RS-225-BO-001), VBA, 28 May 2020[8]
   • Building Order (RS-225-BOMW-003) - Minor Work, VBA, 28 May 2020[9]
2. The cladding defects relate to the external cladding which had been constructed with combustible cladding and had to be replaced. This was done by Cladding Safety Victoria. As noted, the State exercised its right of subrogation claim against the Builder and Mr Farag. As the subrogation claim has been settled, no more need be said about the combustible cladding.
3. The non cladding defects have been rectified at the expense of the OC. This lengthy process has been chronicled by the former OC administrator Mr Matthew Twistleton.
4. The rectification of the non-cladding defects has been borne by the OC, using funds borrowed from Lannock Capital 2 Pty Ltd ('Lannock Capital'). Another significant part of the OC's claim is the claim for interest incurred on the Lannock Capital loan. We discuss the evidence of Mr Mark Benson about this topic below.

1. The defects in respect of which the OC sought damages were summarised in the Scott Schedule handed up by Mr Diaz as follows:

1. External wall construction does not achieve Fire Resistance Level (FRL) required by BCA Specification C1.1 or Performance Check Alternative Solution Report dated 30 November 2007

1. Insulation provided to external walls is not non-combustible contrary to BCA Clause C1.9(a)(i)

1. Passive fire separation between carpark and remainder of building does not achieve FRL of 120/120/120 as required by BCA Clauses C2.8 and C3.5

1. Non-loadbearing walls between Sole Occupancy Units (SOUs) are not of non-combustible construction as required by BCA Clause C1.9(a)(iii)

(a) are of combustible construction contravening BCA Clause C1.9(b);

(b) are not enclosed contravening Clause 2.7 of BCA Specification C1.1;

(c) are not fire rated as required by Alternative Performance Solution; and

(d) do not achieve required FRLs specified in Table 3 of BCA Specification C1.1.

1. Failure to protect openings of external walls within 3m of allotment boundaries contravening BCA Clauses C3.2 and C3.4

1. Walls between adjacent SOUs on level 3 do not extend to the underside of the roof covering or to the underside of a ceiling with a resistance to incipient spread of fire to the roof space of not less than 60 minutes as required by Clause 3.1 of BCA Specification C1.1

1. External walls on level 3 of property that face adjacent allotments or central courtyard walkways that are loadbearing do not achieve a FRL of 60/60/60 as required by Alternative Solution Report

1. Walls between SOUs do not extend to the underside of the floor above contrary to the Alternative Solution Report and Clause 3.1 of BCA Specification C1.1.

The damages claimed in relation to issues 1-9 are $888,822.

1. Failure to construct balconies with a 100 mm hob/step down as specified in architectural drawings

1. Failure to properly install balcony waterproofing systems

1. Failure to construct balconies with adequate drainage.

The damages claimed in relation to issues 10-12 are $729,590.

1. Failure to install fire detection equipment in correct locations and failure to install adequate number of detectors

1. Failure to correctly install Occupant Warning System (OWS) and ensure that OWS produces required sound pressure

1. Failure to install AS 3786[10] interconnected smoke alarms

The damages claimed in relation to issues 13-15 are $86,864.

The damages claimed in relation to this issue are $29,800.

The damages claimed in relation to this issue are $32,764.

1. Failure to install fire rated internal doors to fire-isolated internal stairwell.

The damages claimed in relation to this issue are $14,633.

1. Failure to properly install fire rated penetration seals to penetrations in carpark ceiling

The damages claimed in relation to this issue are $16,148.

1. Failure to construct fire stairwell stairs with spacings complying with BCA Clause D2.16.

The damages claimed in relation to this issue are $7,040.

Implied warranties concerning all domestic building work

1. The OC brings a claim for breach of warranties created by s 8 of the Domestic Building Contract Act 1995 (Vic) ('the DBC Act'). Section 8 provides that the following warranties about the work to be carried out under a domestic building contract are part of every domestic building contract:

(a) the builder warrants that the work will be carried out in a proper and workmanlike manner and in accordance with the plans and specifications set out in the contract;

(b) the builder warrants that all materials to be supplied by the builder for use in the work will be good and suitable for the purpose for which they are used and that, unless otherwise stated in the contract, those materials will be new;

(c) the builder warrants that the work will be carried out in accordance with, and will comply with, all laws and legal requirements including, without limiting the generality of this warranty, the Building Act 1993 and the regulations made under that Act [4] ;

(d) the builder warrants that the work will be carried out with reasonable care and skill and will be completed by the date (or within the period) specified by the contract;

(e) the builder warrants that if the work consists of the erection or construction of a home, or is work intended to renovate, alter, extend, improve or repair a home to a stage suitable for occupation, the will be suitable for occupation at the time the work is completed;

1. The OC relies on the warranties created by ss 8(a), (b), (c), (d) and (f).
2. It follows that the only warranty not relied on was the warranty created by s 8(e) to the effect the home would be suitable for occupation at the time the work was completed. We presume that this is because each of the apartments was habitable at the time the occupancy permit was issued in April 2011.

1. Although the OC did not come into existence until the registration of the Plan of Subdivision, it brings this proceeding relying upon s 9 of the DBC Act, which provides:

In addition to the building owner who was a party to a domestic building contract, any person who is the owner for the time being of the building or land in respect of which the domestic building work was carried out under the contract may take proceedings for a breach of any of the warranties listed in section 8 as if that person was a party to the contract.

1. It has been established since Body Corporate No 1/PS40911511E St James Apartments v Renaissance Assets Pty Ltd [11] ('Body Corporate St James') was decided in 2004 that the OC is the proper party to bring a claim in relation to defects in the common property. Although s 28(d) of the Subdivision Act 1988 (Vic) provides that any common property vests in the owners for the time being of the lots on the plan of subdivision as tenants common in shares proportional to their lot entitlement, Mandie J found at [30] that 'upon a proper construction of the provisions of the Subdivision Act and the Transfer of Land Act, a body corporate is the registered proprietor of a fee simple in the common property.' He went on to conclude, at [42], that a body corporate as registered proprietor falls within the expression 'the owner for the time being' in s 54(3) of the DBC Act_._

1. The Builder raised a number of overarching defences.

1. The first was that it said that if the OC has suffered loss and damage (which is denied), the loss and damage claimed were excessive, extravagant or did not represent the fair and reasonable value of the rectification works undertaken.
2. We reject this defence, noting that this was an unusual case where the applicants came to the hearing having undertaken all necessary rectification works. The OC had accordingly 'put its money where its mouth was'. We adopt, with respect, the observation of Meagher JA of the New South Wales Court of Appeal in Hyder Consulting (Australia) P/L v Wilh Wilhelmsen Agency P/L & Anor[12] that 'It seems almost too simplistic to point out the actual cost was an impeccable alternative method of calculating cost.'

1. The second overarching defence was that the OC's claims included claims for works that were not caused by the any act or omission of the Builder. No evidence was made at the hearing concerning this defence, and it falls away.

1. The third global defence was the OC's particulars of loss and damage were founded on the basis of:

(a) inadequate or unreliable evidence of loss and damage incurred;

(b) insufficiently documented.

1. It was said that further particulars will be provided following discovery, return of subpoenas and by way of an expert report of Berkowitz & Associates, but in the event no further evidence was led at the hearing. This defence falls away.

1. A further defence put forward was that the Builder had, at its own cost, completed the rectification of a number of the alleged defects identified by the consultancy Red Fire, and had separately completed certain electrical works.
2. No evidence was led about this, and the defence falls away.

The OC's agents refused to cooperate with the Builder and its subcontractors

1. Another defence raised was that the OCs consultant, Basic Engineering, refused to deal with the Builder and the Builder's subcontractors. No evidence was led as to how this was relevant, let alone as to how it had increased the cost of the rectification works.
2. Further, the Builder contended that on or about 20 August 2018, it had engaged Mr Ben Rodwell of Sandhurst Electrical and Automation, a qualified and certified electrician and fire contractor, to propose a schedule of works deemed necessary to rectify any alleged fire/electrical issues at the Property. We understand this proposal was not accepted. However, no evidence was given by the builder as to how this increased the cost rectification.

1. Finally, the Builder submitted that in the event that the Tribunal finds that the OC has suffered loss and damage as alleged (which is denied), the OC failed, refused and/or neglected to take proper and reasonable steps to mitigate any losses suffered by reason of the alleged conduct of the Builder.
2. We reject this argument. We note, firstly, that the Builder in this proceeding presented no evidence regarding the OCs alleged failure to mitigate its loss.
3. Secondly, we refer to what Member Rowland said in Moffat v Twiselton.[13] ('Moffat'). In this decision, Member Rowland chronicled, at [8], the work of an administrator appointed to the OC in 2018, Mr Matthew Twiselton, in dealing with significant building defects in the apartment building including the flammable cladding.
4. As the Tribunal may_,_ under s 98(1)(c) of the Victorian Civil and Administrative Tribunal Act 1998 (Vic) ('the VCAT Act'), inform itself of any matter as it sees fit, we take note of the following findings contained in Member Rowland's decision:

(a) At the time of Mr Twiselton's appointment as administrator, the owner's corporation had been served with a building notice dated 8 January 2018 issued by the City of Dandenong. The building notice identified that the building was a danger to the life, safety or health of occupants and the public by reason of combustible cladding and a failure to have an active fire monitoring system.[14]

(b) Following his appointment, the administrator arranged for installation of a fire indicator panel and occupant warning system in compliance with the January 2018 building notice at a cost of $82,570. In March 2019 lot owners were levied $2,020 per lot to cover the cost of these works. However, five lot owners refused to pay the special levy, leaving a deficit of more than $30,000.[15]

(c) In March 2019, following installation of the fire indicator panel and occupant warning system, the owner's corporation was served with two further building orders and a building notice issued by the Victorian Building Authority. The building orders and notice required the owner's corporation to remove the flammable cladding and rectify other fire safety defects.[16]

(d) In June 2019, the administrator entered into a loan agreement with Lannock Capital for a loan of up to $2,500,000 to fund the rectification works. The purpose of the loan was initially to replace the flammable cladding. The administrator determined that the only viable method of funding the required building works was with a loan because it was clear that at least a lot owner related to the Builder would not pay any special levy raised to remedy the building defects.[17]

(e) On 28 May 2020, the owner's corporation was served with further building orders and a building notice as follows:

(i) building order to remove flammable cladding;

(ii) a building order relating to fire detectors, emergency lighting and other safety matters; and

(iii) a building notice in relation to 25 matters including leaking balconies, smoke alarms and other fire and safety matters.[18]

(f) The May 2020 building orders and notice substantially replaced and expanded the earlier orders and notice.

From 2019 to 2022, the administrator arranged for rectification works set out in building orders and building notice to be carried out. The cost of removal of the combustible cladding and its replacement was $1,344,034 and met by Cladding Safety Victoria. The costs to remediate the other works was $1,914,650.18 and was funded by the loan from Lannock Capital. The other works included installing a sprinkler system as an alternate solution to the numerous fire safety defects listed in the building notice and building order and replacement of the tiles and membranes of the balconies. Replacement of the balcony membranes was required to be carried out simultaneously with replacement of the cladding because removal of the cladding would compromise the waterproof membranes of the balconies. Cladding Safety Victoria would not cover the cost of the works to the balconies.

All works were completed by March 2022. It was undoubtedly a challenging task to arrange the substantial and complicated works whilst the building was still occupied and during Covid. The speed with which the administrator was able to complete the works and arrange Cladding Safety Victoria to pay for the cladding reinstatement is a testament to the administrator's diligence.

1. Moffat was commenced in September 2023 by lot owners representing 10 lots. Essentially, their claim was that the administrator should not have taken out the $2.2 million loan with Lannock Capital because the lot owners could not afford to repay the loan and the repayment of $70,968 was totally disproportionate to the value of the lots. Shortly after the proceeding was initiated, a further applicant joined the proceeding. This further applicant made allegations which were adopted by the original applicants. They included that the administrator had acted beyond power and had failed in his duties to act honestly and in good faith and with due care and diligence in taking out the loan. It was also alleged that the administrator had signed documents purporting that a special resolution had been passed by the OC. These claims were ultimately rejected by Member Rowland.
2. Of relevance is that Member Rowland noted, [18] that:
   1. The applicants did not allege that the administrator carried out unnecessary or excessive works. The thirteenth applicant, related to the Farag builder would have been in the best position to obtain that evidence, if it existed. There was no evidence that the administrator had undertaken unnecessary or excessive work ...
   2. The applicants did not allege that the administrator wasted or misused owner's corporation's funds ...
   3. The applicants did not allege that the administrator could and should have done something differently.
3. For these reasons, we find that the allegation that the OC failed to mitigate its loss is not made out.

1. The OC called its lay witnesses first. They were, in order:
   • Mr Anthony Zaknich, a director of Scotia Property Maintenance Pty Ltd ('Scotia'), who adopted a witness statement he had prepared regarding the rectification works carried out at the development by Scotia for the OC.[21]
   • Mr Matthew Oliver Twiselton, the administrator of the OC appointed by the Tribunal in a separate action.[22] Mr Twiselton gave evidence as set out in his witness statement as to the rectification works he had procured.[23]
   • Mr Mark Benson, the Chief Executive Officer of Excel Strata Managers Pty Ltd, which is the manager of the OC. Mr Benson is a chartered accountant and gave evidence as to the interest paid by the OC to Lannock Capital under the Lannock Loan. Mr Benson adopted at the hearing an affidavit he had sworn on 2 July 2025 and, with leave, submitted a further affidavit dated 31 July 2025 to the Tribunal.
2. The OC also called the following expert witnesses:
   • Mr Jonathan Duler, of Basic Expert, a forensic engineer specialising in fire safety and compliance who adopted a report concerning an Essential Safety Measures audit he had undertaken.[24]
   • Dr Jonathon Barnett, formerly of Red Fire Engineers and now a director of Basic Expert, who was engaged by the OC to provide a report in response to a Building Notice[25] issued on 9 January 2018 by the Responsible Authority and was further engaged to provide the following reports:
     1. Determination of Fire Safety, 10 June 2024,[26]
     2. Fire-Resisting Construction of Party Walls, 18 June 2024,[27]
     3. Justification of Sprinkler System, 18 June 2024,[28]
     4. Fire Engineering Brief, 18 June 2024.[29]
   • Mr Paul Cummaudo, a builder and director of Roscon Property Services Pty Ltd ('Roscon'), who was engaged by the OC to inspect the property and provide a defects report.[30] He was further engaged to prepare an additional report concerning the condition of the balconies at the Property.

1. The OC incurred $1,772,897 in rectifying the defects set out above i.e. the sum of the amounts set out in Scott Schedule items 1 to 20 excluding Scott Schedule item 17. Item 17 (Fire escape stairs serving Lot 9) was abandoned at the hearing for want of evidence.
2. In addition to those costs, the OC has incurred further costs comprising consultants' fees and interest.

51 The OC claims the fees that the applicant incurred in engaging various experts for the inspection and assessment of defective works and the management of rectification works. The relevant consultant reports, and their costs, are set out in the Table 2 below, which drawn from the OC's Particulars of Loss and Damage[32].

52 We note that the total is $137,682.4. This does not align with the sum of $165,163 referred to in the OC's opening submissions, but no attempt was made in those submissions to explain the difference between the two figures.

53 We are satisfied that the OC incurred consultant's fees of at least $137,682.41 and will proceed on that basis.Discussion of the claim for consultants' fees

1. The consultants fees' of $137,682.41 incurred by the OC in carrying out rectification work do not include, as far as we can tell, consultants fees incurred in relation to the preparation of expert reports. They certainly do not include the fees of Roscon and Basic.
2. We are satisfied that the consultants fees incurred in getting advice before complex and extensive rectification work was carried out constitute damages which fall into the category of losses which may fairly and reasonably be considered as arising naturally, that is, according to the usual course of things, from the breach of contract. As such, they are compensable under the first limb of the rule in Hadley v Baxendale [33].We will make an award in the sum of $137,682.41 to reflect this.

53 The OC borrowed money from Lannock Capital to fund its rectification works. The interest paid on the Lannock Capital loan to fund rectification work is sought. The relevant evidence is discussed below, at [126]-[132].

1. We now address the individual non-cladding defects in turn.

A comment about the Builder's defences concerning specific defects

1. Although the Builder did not appear at the hearing, it did file points of defence. Relevantly, it raised defences in respect of particular defects. We must address these defences, and do so where appropriate below.

Fire resistant construction related defects (Scott Schedule #1 to #9) - $888,822

1. Fire resistant construction related defects were first identified as early as February 2015 by the GDC following an inspection. These defects were deemed to be of a serious nature that warranted concern for the life, safety and health of occupants and the public. This led to the issuing of the first Building Order[34] (9 February 2015).
2. These defects identified significant areas of non-compliance with Part C of the Building Code of Australia ('BCA'). From the Scott Schedule, the fire-resistant construction defects can be summarised as follows:
   1. External wall construction does not achieve the required Fire Resistance Level ('FRL')
   2. Insulation provided to external walls is not non-combustible
   3. Passive fire separation between carpark and remainder of building does not achieve the required FRL
   4. Non-loadbearing walls between Sole Occupancy Units ('SOUs') are not of the required non-combustible construction
   5. Garbage shaft and carpark exhaust shafts:

1. Failure to protect openings of external walls within 3m of allotment boundaries
2. Walls between adjacent SOUs on level 3 do not extend to the underside of the roof covering or to the underside of a ceiling with a resistance to incipient spread of fire to the roof space of not less than 60 minutes
3. External walls on level 3 of the property that face adjacent allotments or central courtyard walkways that are loadbearing do not achieve the required
4. External walls on level 3 of the property that face adjacent allotments or central courtyard walkways that are loadbearing do not achieve the required FRL.

1. The OC submits that the Builder's work was not performed in a way that all building elements achieved their required fire resistance levels. Instances of those failures were recorded in the various Building Orders and Notices issued by the GDC and the VBA as early as February 2015 up to 28 May 2020.[35] The First Building Notice describes in detail the many areas of non-compliance of various building elements with respect to fire resistance, including service penetrations, fire rated walls and doors/ seals, and Essential Safety Measures ('ESM') relating to fire exits, fire extinguishers, an absence of an ESM annual report and maintenance records.
2. About these issues, the OC submits:[36]

18. The most significant departure from the requirements was that the PAR[37] and cl. 3.1 of BCA Specification C1.1 required all internal non-load bearing walls separating lots were to be of non-combustible construction and be built to the underside of the floor above. However, the [Builder] constructed those walls using timber, a combustible material.[38] Further, the [Builder] did not build those walls to the underside of the wall above and instead allowed a 300 mm 'crawl space' for each floor.[39] These matters were the subject of the Building Notice issued on 28 May 2020.[40]

1. The OC asserts that a substantial defect in the Work was the construction of the Property's garbage shaft. The BCA required that this was of non-combustible construction, enclosed and achieved FRLs. Further, the PAR required that the shaft was fire rated, and fire and smoke sealed.[41] The Builder did not construct the shaft as required in that no chute was installed and access openings to the shaft were not fire rated.[42] These matters were the subject of the Building Notice issued on 28 May 2020.[43]

Lack of fire separation in external walls and between lots

1. Defects in the work were noted in the building notice issued by the VBA on 28 May 2020 concerning the construction of external walls and fire separation between the lots and basement carpark.[44]
2. The Builder denies any breach of statutory warranty in relation to loss and damage relating to fire resistant construction.

1. The Builder denies any breach of statutory warranty in relation to:

(a) the allegedly defective garbage chute system, alleging damage was the result of:

(i) misuse of the garbage chute by the occupants; and

(ii) the failure by the OC to properly maintain the property and its systems.

(b) the allegations contained in the Appendix to the Building Fire Integrity ESM Report.

(c) the allegations contained in the Building Notice Response Letter Report by Red Fire Engineers dated 8 March 2018.

(d) the allegations in relation to the claim for access to unit 31, the need for the lift isolation or other incidental works.

1. The relevant Functional Statements and Performance Requirements for fire resistance in buildings are set out in Part C - Fire Resistance, and Specification 1 - Fire Resistance of Building Elements in the BCA. In determining whether a building element satisfies a specific Performance Requirement, a 'Performance Solution' (alternative solution) or 'Deemed-to-Satisfy Solution' must be met. A Performance Assessment Report ('PAR'), which included an assessment of alternative solutions, was prepared by Gavin Casey of Performance Check[45] (30 November 2007) during the Building Permit lodgement process.
2. The PAR specified a Summary of Conditions outlining the recommendations and requirements derived from the performance-based fire engineering assessment report.[46] The 'Passive protection' items relating to construction requirements were accordingly incorporated into the architectural/ building permit drawings.[47]
3. We find, on the basis of the expert evidence of Mr Jonathan Duler and Dr Jonathon Barnett, as well as the Building Notices, that the fire resistant construction related defects are established, and the building was not constructed in accordance with the Building Permit, the BCA or ancillary documentation, in particular the PAR.

The Builder's submission in relation to the fire sprinklers.

1. In the case of the fire sprinklers installed post construction the Builder submitted that:

At the time of the issuing of the Building Permit for the Building, there was no lawful requirement for the Builder to ensure the premises were sprinkler protected.[48]

1. The OC took expert advice as to how to rectify these issues from Dr Jonathan Barnett. He opined that installing a sprinkler system this '...represents the most effective holistic approach...' to mitigating these matters.[49]
2. The work of installing an automatic sprinkler system throughout the Property[50] was performed by Scotia following a scope of work being issued.[51]
3. The installation of the automatic sprinkler system further required substantial 'make good' works.[52]
4. Dr Barnett gave evidence that his recommendation to install fire sprinklers was a holistic remedy and last resort as, apart from the separate issue of the combustible cladding, building inspections revealed a lack of adequate smoke detection systems, questionable FRL's in external walls, insulation, carpark, fire doors, shafts, structural elements, internal walls, floor slabs, and unprotected openings within the building along the egress path. Dr Barnett's opinion is that these deficiencies constituted numerous fire and life safety issues identified on this building.

1. We think the Builder's submission misses the point. The OC did not install the fire sprinklers because they had originally been incorporated in the design and been omitted. They were installed as they formed part of the most cost effective solution to the situation in which the Builder had placed the OC.
2. The Builder's works, as constructed, did not meet the required level of fire-resistant construction specified in the BCA at the time or in accordance with the PAR, and we accept the evidence of Dr Barnett that the only practical remedy other than extensive demolition was to retrofit fire sprinklers and install fire compliant doors, seals to ceiling penetrations and alarm systems.
3. The Builder led no evidence about these issues, and we find that the OC's claims are established.
4. The OC contends that it expended $888,882 rectifying these defects. This figure was not challenged by the builder, and we accept it.

Defective work in relation to the balconies (Scott Schedule #10, 11 and 12) - $729,590

The Builder's challenge to the OC's standing to bring a claim in respect of the balcony

1. It is necessary at the outset of this discussion to deal with a specific defence the Builder raised in respect of the balconies. This is that the Builder disputes that the OC has standing to bring a claim concerning the balconies because they do not form part of the common property.[53]
2. The point pressed by the Builder is that the balconies do not form part of the Common Property as described in the Registered Plan of Subdivision PS628502Y. The Builder particularises this defence by noting that the Building Permit 1501/2008/000437/0 was issued on 5 May 2008 and the Plan of Subdivision PS628502Y ('the POS') was registered on 3 May 2011. The POS provides, inter alia, that the Location of Boundaries is defined by buildings: Interior Face of Walls, Floors and Ceilings.

1. The OC submits that the Builder's contention is factually wrong and should be rejected by the Tribunal. This is because the contention relies on a mistaken assumption that the structure of the balconies does not form part of the common property. However, an examination of the Plan of Subdivision[54] shows this is not the case because:

(a) the Plan of Subdivision defines the common property to be all the Property except the lots (and including the structure of all walls, floors and ceilings which define boundaries);

(b) the Plan of Subdivision states that boundaries shown by "thick continuous lines" are defined by buildings and that the location of those boundaries is at the interior face of walls, floors and ceilings;

(c) the Plan of Subdivision has been drawn unambiguously to provide that the walls separating each lot from its balcony forms part of common property as illustrated in the below extract ...[55]

Figure 1: Extract of Plan of Subdivision[56]

1. We agree that, for these reasons, the Plan of Subdivision shows that the balconies constitute part of the common property.

1. The OC submits that work was first done to the balconies in order to access the combustible EPS cladding used.[57]
2. There is no dispute that the OC has standing to bring a claim for its losses arising from the use of combustible EPS cladding.
3. In order to remove the combustible EPS cladding, the OC had to compromise the existing waterproofing. This necessitated work by the OC to replace the balcony floor tiling and waterproof membranes.
4. Accordingly, there can be no real dispute that the OC's costs of this work are recoverable as they are costs incurred because of the need to remove the combustible EPS cladding which was not otherwise funded by CSV.
5. We accept these submissions.

1. The alleged defects in relation to the balconies resulted in water ingress and damage into SOUs as well as water pooling in the balcony floor tiling. The defective work in relation to the balconies taken from the Scott Schedule can be summarised as follows:
   1. Failure to construct balconies with a 100 mm hob/step down as specified in architectural drawings
   2. Failure to properly install balcony waterproofing systems
   3. Failure to construct balconies with adequate drainage.
2. Extensive photographic evidence of the balcony defects and water ingress into the SOUs was provided by Mr Zaknich.[58] The defects are numerous. Water ingress to the internal floors of apartments and mould to walls and ceilings are evident. Water ingress to ceilings below balconies as well as internal floors adjacent to balconies are evident.
3. The scope of rectification works go beyond reconstructing balconies to provide 100 mm step downs, installing compliant waterproof membranes and tiling. Scaffolding was erected to the perimeter of the building in order to access façades and balconies. Air conditioning units located on the balconies had to be removed during the rectification works and then reinstalled. Patching and painting of internal walls was required as well as remedial works to internal floors. Many of the rainwater heads for the balcony drainage had to be replaced as they were rusted and failing.

23. The [Contract] required the construction of balconies and the plans specified that those balconies were to be built with a "...minimum 100 mm step down to balcony level..." and using a 'Flexitray' or similar waterproof system.[59] None of the balconies were built according to the plans in that none of them were built with the required step down nor did they have any waterproofing system installed.[60] Further, a substantial number of the balconies were constructed either without any drainage or with adequate drainage.[61]

The balconies are generally in poor condition with the tile grout breaking down, non-complaint falls to drainage outfalls and generally insufficient or missing drain overflow provision. Elimination of water ingress into many of the Units and associated damage is a high priority with all Units requiring substantial repairs.

Generally, the balcony panels are allowing moisture ingress within the units and typically there are generally no hobs beneath the window/door elements to facilitate proper water proofing.[62]

1. The Builder raised a factual to this claim, asserting that:

the 'lack of hobs' allegation is more accurately described as the alleged failure of the builder to include a 100 mm step down to the balcony level in relation to all balconies throughout the property;

this does not constitute a building defect for which the Builder is responsible for as the requirements of AS4654.2 cited in the Roscon Report dated 24 November 2016, upon which the OC relies, was released in 2009 and prior to the date on which the Building Permit was issued.

1. We are satisfied that liability is established. The release date of the relevant version of AS4654.2 is not to the point, as the architectural drawings that form part of the building contract and Building Permit documentation clearly specified a 100 mm hob to all balconies as well as a waterproof membrane using 'Flexitray' or similar product. The Builder's failure to construct the balconies with the required step downs, waterproofing and drainage was addressed in the Building Notice issued on 28 May 2020.[63] We are satisfied that the defect has resulted in water ingress into the Property.[64]
2. To address these matters, the OC engaged Scotia to effectively rebuild the balconies so that they had the required stepdown and drainage.[65]
3. The work done by Scotia to rebuild the balconies with step downs and proper drainage followed Scotia's earlier work to remove the combustible EPS cladding.[66]

Failure to properly install balcony waterproofing systems

1. That there was inadequate waterproofing in the balconies is established by Mr Zaknich's evidence. There is no separate claim for damages, as the balcony tiles had to be lifted and replaced by reason of the other defects for which the builder is to be held responsible.

Failure to construct balconies with adequate drainage

1. On the basis of Mr Zaknich's evidence, we find that this defect is established.

The defence that problems were caused by a lack of maintenance

1. A defence specific to this defect raised by the Builder was that any incidents associated with balcony leaks were caused and/or exacerbated by water overflow from blocked box guttering and rainwater heads. The Builder led no evidence about this, and we accordingly discard the defence.
2. We find that the defects with respect to the balconies are established for the amount claimed of $729,590.

Defective work in relation to Essential Safety Measures (Scott Schedule #13 to #15) - $86,864

1. The defective works in relation to Essential Safety Measures were extensive and posed a serious threat to the safety of occupants and the public.
2. From the Scott Schedule these defects are summarised as follows:
   1. Failure to install fire detection equipment in correct locations and failure to install adequate number of detectors
   2. Failure to correctly install Occupant Warning System (OWS) and ensure that OWS produces required sound pressure
   3. Failure to install AS 3786[67] interconnected smoke alarms

103An audit of the fire detection and essential safety measures was undertaken by Mr Duler. This audit was commissioned following the GDC Building Notice of 8 January 2018.[68] Mr Duler completed his audit and provided a report on 12 April 2018. In his report, Mr Duler considered that:

The ESM defects are so numerous and serious in nature that we believe this building is unsafe and cannot be made safe without major and costly works.[69]

1. Mr Duler opined that fire detectors were not installed correctly and failed to operate as expected[70] and the smoke and heat detector system did not comply with AS1670.1.[71] To address these matters, the OC engaged GH Fire Projects to replace those essential safety measures with ones that complied with the requirements of the PAR and the BCA at a cost of $52,935.[72] Further costs associated with the procurement and management of this work by KPI Contracts Management for the supply and installation of smoke detectors and ancillary works make up the balance of the costs.[73]

1. A Performance Assessment was required to carry out the assessment of Alternate Solutions for the Works in accordance with Part A0 of the Building Code of Australia (Volume 1) to ensure compliance with the mandatory requirements of the applicable Performance Requirements of the BCA. The Performance Assessment set out requirements for the installation of fire-related essential safety measures.[74] What the Performance Assessment required was that:
   • A fire indicator panel be installed on the ground floor in the building's lobby;
   • Hardwired smoke alarms be installed in each lot in accordance with AS 3786;
   • Thermal detectors be provided along all parts of the external walkways.
   • An occupant warning system be designed in accordance with AS 1670[75] and BCA which would be activated upon receipt of a fire signal from the FIP and produce a sound of 85dBA at the entry of each apartment.
2. These items are important to the safety and well being of occupants and the public. Due to the absence of passive fire resistant measures in the completed Building, the absence of ESM fixtures and fittings was particularly egregious and could have had serious consequences for occupants and the public in the event of a fire..
3. The Builder tendered no defence regarding the ESM, and we find the defects are established. We accept the OC's quantification of damages, which was not challenged by the builder. We will award $86,864 for this claim.

Water ingress into the Property's basement (Scott Schedule #16) - $29,800

1. The Builder's work included constructing a basement carpark. Water ingress was evident in the basement carpark.[76] The source of the water ingress was investigated by John Merlo & Associates, who considered that it was caused by a sewer trench built along the Property's northern fence which acted as a water collector without drainage.[77]
2. John Merlo & Associates considered that stopping the water ingress required the installation of new drainage in that trench.[78] The OC subsequently had Scotia do that work.[79]
3. The Builder does not admit any breach of statutory warranty in relation to the alleged basement car park leaks.[80]

1. The builder presented no evidence at the hearing in opposition to this claim, and we find that it is established.
2. We also accept the damages claimed of $29,800.

Lot 9 fire escape stairs (Scott Schedule #17) - $32,764

1. The OC advised in its opening at the hearing that it no longer pressed its claim in relation to this defect. No more need be said about it.

Fire sealing of the basement carpark service/ ceiling penetrations (Scott Schedule #19) - $16,148

1. The Property's ground level carpark was constructed with services penetrating the ceiling slab. The BCA at C2.8 requires that the carpark be fire separated from the remainder of the building and achieve a required FRL. At section C3.12 ('Openings in floors and ceilings for services'), the BCA also requires that any service penetrations passing through the carpark ceiling not compromise the FRL of that ceiling.

108 In constructing the basement carpark, the Builder did not suitably install or seal service penetrations in the carpark[81] in accordance with C 3.12, or where that was done, it was of such poor quality it required replacement.[82]

1. These defects had earlier been identified as defects in the Building Notice issued by the MBS of GDC on 9 February 2015.[83] The OC engaged Fire and Wire to perform the required work, which was invoiced in June and September 2019.[84] The costs incurred were $10,340 and $5,808 respectively, totalling $16,148.
2. The Builder denies any breach of statutory warranty in relation to fire protected penetrations.

1. Photographic evidence of the non-compliant car park ceiling service penetrations (taken during an inspection by Mr Duler[85]) were tendered. These photos show the location and extent of these defects in the carpark. Also, as noted, they were referred to in the Building Notice issued on 9 February 2015. The Builder led no evidence about these issues, and we find that the OC's claims are established.
2. We find the defects to be proven and accept the damages claimed of $16,148.

The fire rated internal doors to fire-isolated internal stairwell and stair balustrade spacings (Scott Schedule #18 and #20) - $14,633 + $7,040

1. The architectural plans show the stairwell is located adjacent to the lift core serving the Property. The Builder was required to construct this stairwell to be fire isolated, with self-closing fire rated doors. This was specified in the performance assessment,[86] prepared at the time of the Building Permit application. The Essential Safety Measures Audit,[87] undertaken in 2018 in response to the second Building Notice Issued by GDC, found that the Builder had not installed fire rated doors to the stairwell.[88]
2. The OC claims that this aspect of the work was defective in that the plans had specified that these doors were to be solid core fire hinged doors with a FRL of -/60/30 and self-closing mechanism.[89] To address this defect, the OC had the doors, door frames and hardware replaced with compliant assemblies.[90] The cost incurred for this item was $14,663.
3. The Builder denies any breach of statutory warranty in relation to this defect and says that the damage to these internal doors accessing the exit stairs was the result of:

(i) misuse of the doors by the occupants; and

(ii) the failure by the OC to properly maintain the property and its systems.

1. We find that the doors installed did not comply with BCA or the contract documents (i.e. including, and in particular, the architectural drawings) and the OC was entitled to insist that they be replaced. The builder led no evidence to support its submission that the doors were replaced as a result of damage done through misuse or neglect on the part of the OC and occupants. This defence fails.

1. The stair balustrades in this stairwell were constructed with gaps between rails exceeding 125 mm[91] contrary to what was specified in the architectural drawings, where under the 'General Notes' maximum gaps to balustrades and treads are to be 125 mm.[92]
2. The OC says that as the stairwell was used for day-to-day access by occupants, BCA Clause 2.16(1)(g)(ii) requires spacings of no more than 125 mm between railings.[93] To address this matter, stainless steel wire railings were retrofitted to the stairwell at a cost of $7,040.[94]
3. The Builder denied any breach of statutory warranty in relation to the balustrades in the fire stair. However, at the hearing, it presented no expert evidence challenging either the claim or its quantum
4. We find the defects to be proven and will award damages for the following amounts:
   • fire rated internal doors to fire-isolated internal stairwell -$14,663
   • stair balustrade spacings -$7,040

1. As noted, the OC seeks damages in respect of the interest it had to pay on the money it borrowed from Lannock Capital to fund the rectification works. The circumstances in which the administrator of the OC, Mr Twiselton, in June 2019, entered into a loan agreement with Lannock Capital for a loan of up to $2,500,000 to fund the rectification works were canvassed by Member Rowland in Moffatt v,[95] which has been discussed above at [40]-[45].
2. Evidence about the interest paid to Lannock Capital was given at the hearing on behalf of the OC by Mr Mark Benson, a Certified Public Accountant, who also is the chief executive officer of Excel Strata Managers Pty Ltd, which is the manager of the OC.
3. Mr Benson, at the hearing, adopted an affidavit he had affirmed on 2 July 2025.[96] In this affidavit, he set out the total amount drawn down on the Lannock loan. This totalled $2,188,620.44. He also prepared a spreadsheet categorising invoices which have been paid using those drawdowns, separating the invoices into categories labelled 'Normal' (covering every day running costs), 'Cladding', 'Rectification' and 'Legal/lawyers'. Mr Benson calculated that up to 5 June 2025, out of total interest charges made by Lannock of $952,351.94, interest of $858,645.15 had been incurred in respect of rectification of defects.
4. The OC was given leave to file a further affidavit from Mr Benson following the hearing regarding the interest relating to rectification of defects. Mr Benson filed a further affidavit affirmed on 31 July 2025. At [9] of this affidavit he deposed that the interest incurred related to the rectification of the defects to 8 July 2025 was $889,228.74. The OC is entitled to an award in respect of this interest.
5. Mr Benson also deposed in his second affidavit, at [10], that the approximate total daily interest on the drawdowns related to the rectification of the defects is $614.25. In the absence of any rebuttal by the Builder we adopt this figure.
6. We calculate that the interest incurred in relation to the rectification of defects in the 114 days between 8 July and 30 October 2025, at $614.25, is $70,024.50. The OC is also entitled to an award in respect of this interest.
7. In summary, the OC is entitled to damages in the nature of interest of ($889,228.74+$70,024.50) = We will make an award accordingly.

1. We will make orders for the payment of damages by the Builder to the OC consistent with these findings. In summary, we will award:
   • Consultants fee of $137,682.41
   • Fire resistant construction related defects $888,882
   • Balcony defects: $729,590
   • ESM defects $86,864.
   • Water ingress into the basement (Scott Schedule #16) - $29,800
   • Fire sealing of the basement carpark service/ ceiling penetrations (Scott Schedule #19) - $16,148
   • The fire rated internal doors to fire-isolated internal stairwell $14,633
   • Stair balustrade spacings $7,040
   • Interest: $959,253.24.

[1] [2023] VCAT 501, [5]-[9].

[2] Supplementary Tribunal Book ('STB') 93.