Plaintiffs v Defendants

PRACTICE AND PROCEDURE - Calculation of interest - Second defendant not joined to proceeding until after the sixty-fourth plaintiff - Civil Procedure Act 2010 (Vic) s 60(1) - Johnson Tiles Pty Ltd v Esso Australia (No 3) [2003] VSC 244; Shoard, v Palmer (1989) 98 FLR 402 referred to.

1. At the commencement of the trial of this proceeding on 30 October 2025 the sixty-fourth plaintiff, the State of Victoria (the 'State'), moved for summary judgement against the second defendant, Mr Obaid Naqebullah. The application was not opposed.
2. The State brings this proceeding against Mr Naqebullah pursuant to s 137F(3) of the Building Act 1993 (Vic) ('Building Act'). Section 137F relevantly provides:

(1) This section applies if -

(a) after the commencement of this Division, the Authority pays an amount to an owner of a building (the payee) by way of financial assistance in relation to cladding rectification work on the building; or

(b) before the commencement of this Division, an amount was paid by or on behalf of the Crown in right of the State of Victoria to an owner of a building (the payee) by way of financial assistance in relation to cladding rectification work on the building.

(2) At the relevant time, the Crown is subrogated to all the rights and remedies of the payee against any person in relation to the installation or use of any non-compliant or non-conforming external wall cladding product, or other building work, that required the cladding rectification work to be undertaken.

(3) If a right or remedy to which the Crown is subrogated under this section is exercisable against an entity that is not an individual, it is enforceable jointly and severally against the entity and the people who were its officers at the time the act or omission that gave rise to the right or remedy occurred.

(4) If it is proved that an act or omission by an entity occurred without the knowledge or consent of an officer of the entity, a right or remedy is not enforceable as provided by subsection (3) against the officer in relation to the act or omission.

(5) The Crown may exercise its rights and remedies under this section in its own name or in the name of the payee.

...

(10) In this section -

officer -

(a) in relation to an entity that is a corporation - means an officer of the corporation within the meaning of section 9 of the Corporations Act; or

(b) in relation to an entity that is neither an individual nor a corporation - means an officer of the entity within the meaning of section 9 of the Corporations Act;

relevant time means -

(a) in the circumstances referred to in subsection (1)(a) - when the financial assistance is paid to the payee; or

(b) in the circumstances referred to in subsection (1)(b) - when this Division commences.

1. The State relied on the documents referred to in its written opening submissions. It relied on lay and expert evidence from the following witnesses, none of whom were required for cross examination:

(a) Stephen Lindsay, in relation to the project management of rectification works completed by Hutchinsons Builders ('Hutchinsons');

(b) Samuel Hogg, in relation to the project management of rectification works completed by Carringvale Pty Ltd ('Carringvale');

(c) Jeff Beck, a domestic builder and building consultant, in relation to the non-compliance of expanded polystyrene cladding ('EPS Cladding');

(d) Stephen Kip, a fire engineer and building surveyor, in relation to the non-compliance of the EPS Cladding and the reasonableness of the scope of the rectification works by both Hutchinsons and Carringvale; and

(e) Christopher Daubney, a quantity surveyor, in relation to the reasonableness of the costs of the rectification works.

1. Following written and oral submissions and the tendering of evidence by counsel appearing on behalf the State, and after hearing briefly from senior counsel for Mr Naqebullah and for the 19th and 20th third parties (the 'Underwriters'), being those parties comprising the active participants in the proceeding, I informed the parties that I would grant summary judgement. I said that I would excuse the State from further attendance and participation in the proceeding.
2. The parties proposed, and I agreed, that I would deliver my reasons in relation to the application for summary judgement before proceeding with the balance of the trial. In addition to reasons in relation to summary judgement, is also necessary to provide reasons in relation to the correct quantification of the entitlement of the State to interest against Mr Naqebullah pursuant to s 60 of the Supreme Court Act 1986 (Vic) (the 'Act').
3. These are those reasons.

1. The issues that separate Mr Naqebullah and the State on the pleadings are quite narrow. The parties signed a statement of agreed facts which identifies a number of issues that are not in dispute. Other matters that are either not admitted or denied by Mr Naqebullah are the subject of evidence upon which the State relied at trial which is not challenged.
2. The first defendant, Shangri-La Construction Pty Ltd ('Shangri-La'), entered into a design and construct contract as contractor with the second plaintiff, MMD Mazor Construction Pty Ltd ('MMD Mazor'), as principal dated 22 August 2011 for the design and construction of residential apartments at 3, 5-7 Dixon Street and 2-8 Murray Street, Clayton (the 'Building').
3. The State alleges in its amended statement of claim dated 30 July 2024 ('ASOC') and Mr Naqebullah admits in his amended defence dated 3 October 2025 ('Defence') that the contract was a 'Domestic Building Contract' to which the provisions of the Domestic Building Contracts Act 1995 (Vic) ('DBC Act') apply.
4. The ASOC alleges and the Defence admits that at all relevant times Mr Naqebullah was a director of Shangri-La. In consequence of that admission, Mr Naqebullah was at all relevant times an officer of Shangri-La within the meaning of s 9 of the Corporations Act 2001 (Cth), to which s 137F(10) refers.
5. The State submitted the only issue that arises for determination so far as it is concerned is whether Shangri-La breached statutory warranties contained in the DBC Act by using and installing EPS Cladding as part of the external façade of the Building.
6. The following definitions in s 3(1) of the DBC Act are relevant:

building includes any structure, temporary building or temporary structure and also includes any part of a building or structure;

...

domestic building work means any work referred to in section 5 that is not excluded from the operation of this Act by section 6;

...

home means any residential premises and includes any part of a commercial or industrial premises that is used as a residential premises ...

(1) This Act applies to the following work -

(a) the erection or construction of a home ...

1. The exclusions in s 6 of the DBC Act do not apply in this case.
2. The ASOC alleges and the Defence admits:

(a) the construction of the Building was required to comply with the Building Code of Australia 2006 (the BCA), which was adopted by and formed part of the Building Regulations 2006 (Vic) made under the Building Act;

(b) pursuant to cl C1.1 of the BCA, the Building was required to be of Type A construction, being the most fire-resistant type of construction prescribed under the BCA;

(c) pursuant to cl 3.1 of Specification C1.1 of the BCA, the external walls of the Building, being a building required to be of Type A construction, were required to be non-combustible;

1. In his witness statement Mr Naqebullah states that on or about May 2011, on behalf of Shangri-La, he advised and recommended to Bayside Project Management ('BPM') on behalf of MMD Mazor that the design of the external cladding on the Building would comprise of 100mm expanded polystyrene foam panels finished with an acrylic render system. On or about May 2011 and at a subsequent meeting, the EPS design advice he gave was accepted by Mr Jonathan Hallinan of BPM on behalf of MMD Mazor. Mr Naqebullah was requested by Mr Hallinan to draw the Project Specification that was to be incorporated into the contract.
2. The ASOC alleges and the Defence admits that Shangri-La carried out the works the subject of the contract between 22 August 2011 and 21 June 2013.
3. An occupancy permit for the Building, described as the construction of 81 apartments (3 storeys) and a basement car park, was issued on 21 June 2013.
4. The ASOC alleges and the Defence admits that Shangri-La constructed the Building using combustible EPS Cladding.
5. It is common ground that EPS Cladding was not non-combustible for the purposes of cl 3.1 of Specification C1.1 of the Building Code of Australia 2006 ('BCA'), which was adopted by and formed part of the Building Regulations 2006 (Vic) made under the Building Act. It is also admitted in the Defence that, if the reference in paragraph 40(e) of the ASOC to 'Building' is a reference to 'Buildings', the EPS Cladding 'constituted an undue risk of fire spread via the façade for the purposes of cl 2.4 of Specification C1.1 of the BCA'. There is no basis to read the word 'Building' as confined to the singular.
6. The ASOC alleges and the Defence admits there were terms of the contract by operation of s 8 of the DBC Act pursuant to which Shangri-La warranted that:

(a) all materials to be supplied by the Builder for use in the work carried out under the Contract would be good and suitable for the purpose for which they were used and that, unless otherwise stated in the Contract, those materials would be new (as provided in s 8(b) of the DBC Act); and

(b) the work under the Contract would be carried out in accordance with, and would comply with, all laws and legal requirements including, without limiting the generality of this warranty, the Building Act and the regulations made under that Act (as provided in s 8(c) of the DBC Act).

1. The general conditions of the contract include that pursuant to s 8 of the DBC Act, Shangri-La 'warrants that the dwellings included in the Works will be fit for the purpose of premium quality dwellings and will be of such nature and quality that they might reasonably be expected to achieve that result'.
2. Although Mr Naqebullah does not admit in his Defence that the warranty in s 8(f) of the DBC Act was also a term of the contract, having regard to the purpose specified in the general conditions, I accept the State's submission that the statutory warranty in s 8(f) of the DBC Act formed part of the contract.
3. Section 8(f) of the DBC Act provides:

8 Implied warranties concerning all domestic building work

The following warranties about the work to be carried out under a domestic building contract are part of every domestic building contract -

...

(f) if the contract states the particular purpose for which the work is required, or the result which the building owner wishes the work to achieve, so as to show that the building owner relies on the builder's skill and judgement, the builder warrants that the work and any material used in carrying out the work will be reasonably fit for that purpose or will be of such a nature and quality that they might reasonably be expected to achieve that result.

1. The recommendation to use EPS Cladding was a recommendation to use a form of cladding which is not a product permitted for such use by the relevant regulations and codes. The use of EPS Cladding was not approved as an Alternate Solution by the relevant building surveyor. The use of EPS Cladding was also not in accordance with the approved drawings for construction of the Building.
2. I refer to and accept Mr Beck's evidence that:

The stamped and approved building permit design drawings state the lightweight external cladding to be installed at the property was 15mm Multi Board Lining (X-line), however 75mm expanded polystyrene foam cladding (EPS) cladding has been installed at the building.

The Building Code of Australia (BCA) does not consider EPS as a deemed-to-satisfy (DtS) cladding in relation to weather proofing of the building, further the cladding is combustible. The use of this cladding, particularly in a multi-story building was required to be assessed as an Alternate Solution by the relevant building surveyor prior to the issuing of a building permit.

EPS cladding has not been installed in accordance with most manufacturer's recommendations and one of the Victorian Building Authority (VBA) approved systems.

There is evidence of expanded polystyrene foam cladding (EPS) which has been extensively installed throughout the buildings. EPS cladding is not a deemed-to-satisfy (DtS) cladding in accordance with the Performance Provisions of the BCA...

It appears the EPS is a substituted cladding from the building permit documents and therefore the cladding and the 'construction system' should have been assessed by the relevant building surveyor prior to the issuing of a building permit via an Alternate Solution.

There is no record on the building permit that an Alternate Solution was approved by the relevant building surveyor (RBS). Further, I could not find any documentation in the permit documents provided as part of my brief as to any change from the approved cladding to the cladding installed on the buildings.

1. In his first report, Mr Kip gave expert evidence, which I accept, which includes the following:

The system designed and shown on the architectural drawings is CSR911 with a 15 mm multiboard lining to the outside and this is generally consistent with the CSR 911 system which requires at least 6 mm thick CeminSeal™ cladding.

...

The system installed by the builder is instead 75 mm thick rendered expanded polystyrene cladding (see Photo No. 3.1). Polystyrene is a highly combustible material; not approved for multi-storey use in Australia and of concern to insurers14. It is also non-compliant with the CSR tested system, the building permit and breaches Clauses A2.2(a) & C2.4(b) of the BCA.

...

The external walls must therefore be re-clad with a CodeMark approved material complying with the BCA for this installation, and all penetrations treated as required by that tested and accredited system.

1. Mr Kip also noted that the columns and beams do not comply with the BCA because they are also clad with layers of expanded polystyrene. The same is the case in relation to some internal walls which are clad with the same sheeting, meaning that they are non-compliant with cl 4 of BCA Specification C1.10. It is his expert evidence, which I accept, that expanded polystyrene will not pass the requirements of that clause.
2. On about 24 April 2013 the first plaintiff, the owners corporation ('OC'), was incorporated upon registration of Plan of Subdivision PS 640567Y under the Subdivision Act 1988 (Vic) relating to the Building, comprising both the common property and the individual lots identified on the Plan of Subdivision. The OC became the registered proprietor of the common property in the Plan of Subdivision and on various dates thereafter, the OC's members became the registered proprietors of the individual lots ('individual lot owners').
3. On 24 July 2017 the municipal building surveyor for the Monash City Council (the 'MBS') issued an emergency order to the OC and the individual lot owners (together, 'Owners') under s 102 of the Building Act in respect of the Building which included the following statements:

(a) the RAW Fire Engineering report dated 30 September 2011 required compliance with the Deemed to Satisfy Provisions of the BCA, and these provisions had not been achieved in:

(i) the fire resistance level of the external cladding; and

(ii) the protection of service penetrations; and

(b) therefore the following Alternative Solutions did not meet the performance requirements of the BCA:

(i) CP1 and C2: General reduction in the required fire resistance level from 90/90/90 to 60/60/60;

(ii) CP2: Lack of complying non-combustible spandrels between windows and other openings between apartments on different levels;

(iii) DP4: Extended travel distances to the nearest available exit, between alternative exists and to a point of choice; and

(iv) DP4: Discharge of a non-fire isolated stair more than 15 metres from a door leading to the outside.

1. The MBS issued further emergency orders to the Owners in relation to the Building on each of 7 August 2017, 21 September 2017 and 29 May 2019. The emergency order issued on 29 May 2019 ('Fourth Emergency Order') included statements to the following effect:

(a) the external walls of the Building consist of combustible expanded polystyrene cladding or lining which may constitute an undue risk of fire spread;

(b) the Building contains windows within and adjacent to the combustible expanded polystyrene cladding or lining which may increase the risk of spread of fire to or from the cladding to the internal part of the Building in the event of fire; and

(c) the combustible expanded polystyrene cladding or lining is adjacent to potential ignition sources on balconies increasing the risk of fire spread.

1. The Fourth Emergency Order required the Owners, by 16 June 2019, to carry out building work or other work to make the Building safe:

(a) remove the combustible expanded polystyrene within 3 metres of the Murray Street exit door and egress path of travel to the street at ground level including the adjacent columns on the north east corner of the Building. Replace with cladding compliant with Part C1.9 of the National Construction Code 2019;

(b) remove the combustible expanded polystyrene within 3 metres of the Dixon Street exit door and egress path of travel to the street at ground level including from behind the fire indicator panel. Replace with cladding compliant with Part C1.9 of the National Construction Code 2019;

(c) install metal awning above both exit doors on Dixon Street to protect the egress path of travel; and

(d) remove all potential portable ignition sources on balconies until further notice. Remove combustible items on balconies until further notice.

1. On 3 June 2019, the MBS issued a building notice under s 106 of the Building Act in respect of the Building ('Building Notice'). The Building Notice followed an inspection of the Building by the MBS in consultation with the Victorian Cladding Taskforce which, at that time, was examining the extent of inappropriate use of cladding materials on Victorian buildings.
2. The Building Notice included statements that the MBS was of the opinion that:

1.1. The building is a danger to the life, safety or health of any member of the public or to any person using the building or to any property in that:

1.1.1. The building has combustible Expanded Polystyrene (EPS) cladding covering a large proportion of the external walls, which comprises the passive fire protection to the building and the means of egress for the occupants and/or the public or any person using the building.

1. The Building Notice included statements requiring the Owners to show cause within 30 days of the date of service of the Building Notice:

2.1 Why entry, use, or occupation of the building should not be prohibited;

2.2. Why you should not be required to evacuate the building;

2.3 Why you should not carry out the following building work identified in this notice in relation to the building:

2.3.1 Remove all combustible Expanded Polystyrene (EPS) cladding installed on the external walls of the building and replace with cladding compliant with Part C1.9 of the National Construction Code 2019 - Volume One ('Building Code of Australia Volume 1'), pursuant to regulation 10 of the Building Regulations 2018.

1. The Owners were statutorily obliged to comply with the emergency orders and the Building Notice.
2. The cladding rectification work was funded by way of a grant of financial assistance to the Owners as provided for in s 137F(1) of the Building Act.
3. On 30 June 2020, the OC, for and behalf of the Owners, entered into a funding agreement with Cladding Safety Victoria ('CSV') to fund the performance of cladding rectification works at the Building ('First Funding Agreement').
4. By contract dated 2 October 2020, Hutchinsons was engaged to perform the rectification works following a competitive tender conducted by Deloitte PDS Group Pty Ltd ('PDS') ('Hutchinsons Contract'). The rectification works began on 7 December 2020.
5. On 16 December 2020, CSV made the first of a series of payments to the OC in relation to the cladding rectification works to the Building pursuant to the First Funding Agreement. The State paid a total of $1,902,858.52 (including GST) to the Owners between 16 December 2020 and 1 July 2021.
6. During the course of the works performed by Hutchinsons, PDS identified a number of latent defects and non-conforming conditions which, on the recommendation of PDS, led to the suspension of the works in April 2021. In October 2021 the Hutchinsons Contract was terminated. These events are detailed in the evidence of Mr Lindsay.
7. In September 2022, CSV entered into a further funding agreement with the OC, for and behalf of the Owners, for the completion of the rectification works by Carringvale. In its letter dated 28 September 2022 to the Owners, CSV stated that it would provide a grant of up to $1,712,725.69 (excluding GST) to fund cladding rectification works for the Building.
8. On 5 September 2022, a contract was entered into with Carringvale to complete the rectification works. As discussed in the evidence of Mr Hogg, the work performed by Carringvale was project managed by Property & Strata Group. A certificate for practical completion of the relevant works completed by Carringvale was issued on 14 February 2025.
9. In his fourth report, Mr Kip expressed his opinion that the scope of works that Hutchinsons was originally contracted to carry out was reasonable. He expressed the same opinion in relation to the work carried out by Carringvale. With respect to both, he said it was 'reasonable and necessary to rectify the EPS [C]ladding in the specific circumstances of [the] site'. With respect to the work carried out by Carringvale he went on to say the rectification works 'were required to ensure the safety of the occupants of the [B]uilding'. I accept the accuracy of the opinion evidence of Mr Kip to which I have referred.
10. Although the State relied on the expert evidence of Mr Daubney, the expert quantity surveyors produced a joint report in which the reasonable costs to rectify the EPS Cladding at the Building, including building and project management costs, was agreed to be $3,174,775.99 (excluding GST). This is the amount for which the State seeks summary judgment.

1. The State submitted and I accept that s 137F(3) imposes strict liability on Mr Naqebullah by virtue of his status as an officer of Shangri-La at the time at which there were breaches of the statutory warranties in s 8 of the DBC Act by Shangri-La. Mr Naqebullah's liability does not arise because of any additional, separate or concurrent wrongdoing on his part personally.
2. In Owners Corporation 1 Plan No PS 707553K v Shangri-La Construction Pty Ltd,[1] a case involving issues very similar to those in this case and concerning the same builder and officer, Judge McNamara, whose decision was upheld on appeal,[2] said:[3]

Mr Naqebullah's liability to the State (if it exists) is derivative from the liability said to be owed to the State by Shangri-La as being subrogated to the rights of the owners and their owners corporation as the original applicants/plaintiffs in this proceeding. The first step in considering the alleged liability of Mr Naqebullah is to consider whether, subject to the statutory stay imposed by the Corporations Act, the State has a good claim against Shangri-La.

1. The State submitted, and I accept, that when Judge McNamara was referring to the existence of a 'good claim', his Honour was referring to something analogous to a jurisdictional fact. Namely, that a finding of breach by Shangri-La is an integer or precondition to the operation of s 137F. However such a finding is not a finding or determination as between the State and Shangri-La (now in liquidation) in respect of whom no leave to proceed has been sought or obtained.
2. What s 137F(3) requires is that the Court is satisfied that a right or remedy exists that would be 'exercisable' against an entity that is not an individual. The section does not require that the right or remedy is exercised against that entity.
3. I accept the submission that if the Court is persuaded that Shangri-La has breached one or more of the statutory warranties in s 8 of the DBC Act, that satisfies the requirement of the existence of a right or remedy against another entity and, in turn, enables and empowers the State to enforce its right or remedy against Mr Naqebullah personally pursuant to the statute.
4. I accept the proposition, submitted on behalf the State, that if the facts show there has been a breach of one or more of the statutory warranties, there is no substantive defence available to a claim of contravention. No issues as to the exercise or otherwise of reasonable care arise. Strict liability is the order of the day.
5. In Owners Corporation No.1 of PS613436T v LU Simon Builders Pty Ltd (Building and Property),[4] Judge Woodward (as his Honour then was) referred to Barton v Stiff,[5] where Hargrave J (as his Honour then was):[6]

confirmed the principle that a builder's liability for design and construction was not merely an obligation to use reasonable care. In particular, the warranty of fitness for purpose was absolute.

Thus I accept the Owners' submission that the warranties are "not qualified or limited to an obligation to use reasonable care and skill."

1. Section 61 of the Civil Procedure Act 2010 (Vic) is in the following terms:

61 Plaintiff may apply for summary judgment in proceeding

A plaintiff in a civil proceeding may apply to the court for summary judgment in the proceeding on the ground that a defendant's defence or part of that defence has no real prospect of success.

1. I am satisfied that Mr Naqebullah's defence has no real prospect of success.
2. The State submits the effect of the judgments of the Court of Appeal in State of Victoria v L.U. Simon Builders Pty Ltd[8] and Naqebullah v State of Victoria,[9] and this Court's ruling in this proceeding dated 24 September 2025,[10] is that any action or remedy that the State might have pursued against Shangri-La may be enforced personally against Mr Naqebullah pursuant to s 137F(3) of the Building Act, on the basis that Mr Naqebullah was an officer of Shangri-La. I agree that is the case.
3. It submits that a further effect of the Court of Appeal's judgments, and the 24 September 2025 ruling, is that Mr Naqebullah has no defence to the State personally enforcing any action or remedy that it may have had against Shangri-La against him. The consequence is that, if the Court is satisfied that Shangri-La has breached any one of the statutory warranties in the DBC Act, it must order that Mr Naqebullah is liable to the State for an amount reflecting the reasonable costs of rectifying that breach, which is agreed as $3,174,775.99 (excluding GST). I agree with those submissions by the State.
4. I am satisfied on the evidence that Shangri-La has breached the statutory warranties in ss 8(b) and (c) of the DBC Act.
5. I agree with the State that, consistent with Lacrosse, the installation of EPS Cladding is 'obviously not good or suitable for the purpose of being used in the external walls of a residential building and, therefore, breaches the warranty in s 8(b)'. The failure to comply with the BCA is 'also sufficient to establish a breach of s 8(c)'. Those breaches of the statutory warranties are admitted on the pleadings.
6. In Lacrosse, Judge Woodward observed the BCA requires that a building have elements which will avoid the spread of fire to the degree necessary to achieve the objective, and requires that such buildings be of 'Type A construction', being the most fire-resistant type of construction, and specifically provides that their external walls must be non-combustible. [11]
7. I find that Shangri-La breached the statutory warranty in s 8(f) of the DBC Act when carrying out the work under the contract, the purpose of which was the construction of premium quality dwellings. That breach concerned the use of EPS Cladding in circumstances where such use was contrary to the BCA in relation to Type A construction which required external walls of the Building to be non-combustible.
8. The use of EPS Cladding involved the use of cladding which was not fit for purpose and in breach of the warranty in s 8(f). In addition, by installing cladding that did not comply with the performance requirements of the BCA, Shangri-La provided a building that did not meet the minimum standards for public safety.[12]
9. The emergency orders and the Building Notice, issued between 7 August 2017 and 3 June 2019, required the removal of the EPS Cladding and rectification to make the Building safe. Although not a party to the domestic building contract, the Owners were required by reason of the emergency orders and the Building Notice to carry out rectification work. The evidence establishes the rectification work carried out, first by Hutchinsons and then by Carringvale, was 'cladding rectification work' of the type contemplated by s 137F of the Building Act.
10. The effect of s 9 of the DBC Act is that the Owners who were not parties to the domestic building contract pursuant to which the work the subject of the breach of warranty claim occurred have standing to sue for breach of the implied warranties.
11. Section 9 of the DBC Act 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. As noted above, CSV paid the OC by way of grants of financial assistance in relation to that cladding rectification work. By reason of CSV having paid such financial assistance, s 137F(2) of the Building Act subrogates the Crown in the right of the State to all the rights and remedies of the OC and the individual lot owners against any person in relation to the installation or use of any non-compliant or non-forming external wall cladding product or other building work which required cladding rectification work to be undertaken.
2. By reason of the State's statutory subrogation, the right to sue that is conferred by s 9 of the DBC Act is a right held by the State.
3. I find that the reasonable cost of rectifying the breach of statutory warranties in the DBC Act is in the amount agreed by the quantity surveying experts, $3,174,775.99 (excluding GST).
4. The right or remedy to which the Crown is subrogated under s 137F(2) of the Building Act is exercisable against Shangri-La for breach of the statutory warranties. Shangri-La is not an individual. In those circumstances, by operation of s 137(3), the right or remedy which is exercisable against Shangri-La is enforceable against Mr Naqebullah, who was an officer of Shangri-La at the time of the act or omission that gave rise to the right or remedy.
5. Mr Naqebullah was a director of Shangri-La at all relevant times and, in particular, was a director at the time when the building work that required the cladding rectification work to be undertaken was performed.
6. Although s 137F(4) of the Building Act provides a potential answer to a claim by the Crown against an officer of an entity, there are no circumstances that arise in this case that would entitle Mr Naqebullah to rely on s 137F(4) and, quite properly, his Defence does not seek to raise any such issue.
7. While the State directed written and oral submissions to a plea raised by Mr Naqebullah of failure to mitigate, during the hearing, senior counsel for Mr Naqebullah informed the Court that this allegation was not pressed. That being the case, it is unnecessary to say anything further about it.
8. For the reasons earlier discussed, there will be judgement for the sixty-fourth plaintiff, the State, against the second defendant, Mr Naqebullah, in the amount of $3,174,775.99 (excluding GST).

1. Section 60(1) of the Act provides:

60 Interest in proceedings for debt or damages

(1) The Court, on application in any proceeding for the recovery of debt or damages, must, unless good cause is shown to the contrary, give damages in the nature of interest at such rate not exceeding the rate for the time being fixed under section 2 of the Penalty Interest Rates Act 1983 as it thinks fit from the commencement of the proceeding to the date of the judgment over and above the debt or damages awarded.

1. The State does not seek interest from the commencement of the proceeding, but appropriately, from the commencement of its involvement in the proceeding. Although the proceeding was commenced in 2023, it was not until 17 November 2023 that the State, in whose favour summary judgment is to be ordered, was joined as a party to the proceeding.
2. In the circumstances outlined, the date of the commencement of the proceeding for the purpose of the interest calculation in s 60(1) is 17 November 2023.
3. Mr Naqebullah was not joined as a defendant until 1 February 2024. As discussed during the hearing, the application to join Mr Naqebullah was made much earlier. Joinder was initially opposed by Mr Naqebullah and it was only following the withdrawal of that opposition that the joinder order was made.
4. Section 60(1) is concerned with an award of interest 'from the commencement of the proceeding to the date of judgment' unless good cause is shown to the contrary. The starting point for the fundamental entitlement to interest, to which the section is directed, is a calculation from 'the commencement of the proceeding'. The test of the section is not directed to a calculation which runs from the commencement of the joinder of a particular party.
5. In Johnson Tiles Pty Ltd v Esso Australia (No 3),[13] Gillard J said the purpose of s 60 is to compensate the judgment creditor for being kept out of funds from the commencement of the proceeding until judgment, to deter the judgment debtor from delaying payment and thereby having a use of the money for a longer period, and to encourage a prospective or actual defendant to make a realistic assessment of his or her liability in respect of the alleged debtor claim and to take prompt steps to compromise it.[14] The text of s 60, which provides for interest to run from the commencement of the proceeding, accords with the purpose identified by his Honour.
6. The burden of showing 'good cause to the contrary' (that is, why interest should not be ordered against Mr Naqebullah from the date the State was joined until judgment) lies with Mr Naqebullah.
7. In Shoard, v Palmer,[15] a case where the joinder of parties had resulted in delays, the NSW Court of Appeal declined to 'otherwise order' by reference to the 'exigencies of the list'.
8. I do not consider that 'good cause' requiring departure from the default position in the calculation of interest has been shown by Mr Naqebullah.
9. In those circumstances I will order interest on the sum of $3,174,775.99 (excluding GST) in the sum of $550,672.14 to 30 October 2025, as calculated by the State and referred to in the draft order submitted on its behalf.
10. I note that by agreement between the parties, enforcement of the judgement obtained by the State against Mr Naqebullah is to be deferred until the hearing and determination of the third party proceeding between Mr Naqebullah and the Underwriters.

MMD MAZOR CONSTRUCTION PTY LTD (A.C.N. 137 919 147)

HOUSING FIRST LTD (A.C.N. 116 093 004) (Formerly known as PORT PHILLIP HOUSING ASSOCIATION LTD)

ASHWINI BHARGAVA (withdrawn from proceeding 20/02/2020)

CLAYTON SUPER INVESTMENTS PTY LTD (A.C.N. 164 080 513)

SHANGRI-LA CONSTRUCTION PTY LTD (A.C.N. 130 534 244)

CERTAIN UNDERWRITERS AT LLOYD'S SUBSCRIBING TO POLICY NUMBER P0003310PI2017AU1

CERTAIN UNDERWRITERS AT LLOYD'S SUBSCRIBING TO POLICY NUMBER P0003310PI2018AU2

[1] [2023] VCC 1473.

[2] Naqebullah v State of Victoria [2024] VSCA 307 (McLeish, Niall and Lyons JJA).

[3] Owners Corporation 1 Plan No PS 707553K v Shangri-La Construction Pty Ltd [2023] VCC 1473, [72] (Judge Macnamara).

[4] [2019] VCAT 286 ('Lacrosse').

[5] [2006] VSC 307.

[6] Owners Corporation No.1 of PS613436T v LU Simon Builders Pty Ltd [2019] VCAT 286, [285] (Judge Woodward).

[7] Owners Corporation No.1 of PS613436T v LU Simon Builders Pty Ltd [2019] VCAT 286, [286] (Judge Woodward).

[8] [2025] VSCA 52.

[9] [2024] VSCA 307.

[10] Owners Corporation 1 Plan No. PS 640567Y v Shangri-La Construction Pty Ltd (Unreported, Supreme Court of Victoria, Delany J, 24 September 2025).

[11] Owners Corporation No.1 of PS613436T v LU Simon Builders Pty Ltd [2019] VCAT 286, [287]-[288].

[12] Owners SP 92450 v JKN Para 1 Pty Limited [2023] NSWCA 114, [107] (Gleeson JA, White and Brereton JJA agreeing); Tanah Merah Vic Pty Ltd v Owners' Corporation No 1 of PS613436T (2021) 75 VR 1; [2021] VSCA 72, [209] (Beach and Osborn JJA, Stynes AJA).

[13] [2003] VSC 244.

[14] Johnson Tiles Pty Ltd v Esso Australia (No 3) [2003] VSC 244, [61] (Gillard J).

[15] (1989) 98 FLR 402, [34] (Kirby P).