· Part 1 - rectification works to common property $24,170
· Part 2 - rectification works to Unit 2 $51,107
· Part 3 - rectification works to disputed defects $36,043.
17 The impact of the unavailability of precisely matching tiles on this was $1,100, inclusive of GST, in Part 2.
18 As noted above, the Ferrocon quote was admitted for the purpose only of proving the additional cost of replacing tiles, if matching tiles were unavailable. For that, Ferrocon allowed $38,975, plus GST. In contrast to Mr Makin's report, there is no calculation to explain the basis on which that sum is reached, but it appears to cover removal of all wall and floor tiles and replacement with new selected tiles. I am unpersuaded that such a course is reasonable, particularly in the absence of evidence establishing that a reasonably approximate match, albeit not a precise match, is unachievable.
19 In his written submissions, Mr Gray SC for the defendants has advanced arguments as to why each item included in Part 3 of the assessment is attributable to common property, and not to Unit 2. No contrary argument has been advanced. I accept that those items are referable to common property. Items 9 and 10 involved respectively water damage to ceilings and peeling paint work on ceilings; the ceiling and the paint on it is not within the cubic space of the lot and forms part of the common property. Items 11 and 12 refer to floor tiles in the lobby, bathroom and ensuite; they form an integral part of the floor and are not within the cubic space of the unit but are part of the common property. Item 14 relates to the door threshold; it is either outside the lot or forms part of the floor. Item 16 relates to the sanding and finishing of the timber flooring; the upper surface of the floor is not within the unit, but is part of the common property. Item 20 pertains to peeling paint work to ceilings and cracks in external render to lintels. Even if - which Mr Branch thinks unlikely - these were caused by the Unit 1 and Unit 3 works, the inner surfaces of the boundary walls are not within the cubic space and are not part of Unit 2. Accordingly, all the Part 3 works are referable to common property and not to Unit 2.
20 It follows that the cost of rectification works to Unit 2 in respect of damage occasioned by the Unit 1 and Unit 3 works - inclusive of an allowance for replacement of a whole wall of tiles, where only five are affected, due to the unavailability of a precise match - and inclusive of GST, is $51,107. As that was as at 28 April 2010, interest from that date would be appropriate.
21 As to diminution in value, the Stolfas tendered a report of Mr Vasiliou, valuer, who opined that Unit 2 was worth $1.631 million "as is", but $1.780 million if all the damage - to Unit 2 and the common property - were repaired. Thus he deduced that the diminution in value occasioned by the damage was $149,000. He reached that conclusion by, first, valuing the property as if it had been repaired at $1.780 million, and then deducting the cost of repairs (using the Makin quote, but substituting the cost of replacement tiles in accordance with the Ferrocon quote), holding costs for four and a half weeks ($10,000, representing a period of delayed settlement while remediation works were effected), and allowing for betterment resulting from the remediation works ($15,000).
22 There are, I think, several problems with this approach. First, it assumes that the purchaser (and vendor) would approach the matter by allowing a dollar for dollar a discount for the costs of repairs. While it must be said that there is some logic to that approach, it does not accord with experience or reality - it being conventionally accepted that the cost of repairs and improvements are reflected dollar for dollar in increased value.
23 Secondly, it includes provision for replacement of all tiles in accordance with the Ferrocon quote, when I have found that such a course would not be reasonable. It would be necessary to substitute Mr Makin's total provision, of $111,320, in place of the $154,000 assumed by Mr Vasiliou. However, I accept that a corollary of that would be that the provision for betterment of $15,000 allowed by Mr Valiliou would no longer be appropriate. The result would then be rectification costs of $111,320 plus holding costs of $10,000, a total of $121,320.
24 Thirdly, Mr Vasiliou assumes that the purchaser would allow for the cost of repairs to the common property, of some $60,213, but does not take into account that that work would be the responsibility of the Owners Corporation and that the purchaser would have an absolute right to require the Owners Corporation to perform it, with - at worst - 30% of the cost being recoverable from the lot owner, if the whole was not recoverable by the Owners Corporation from the defendants. I do not understand why the cost of remediation of common property which the purchaser would be entitled to have performed by the Owners Corporation should result in a commensurate diminution in value of the lot. On the other hand, I accept that the vexation, inconvenience and uncertainty associated with the necessity of having the Owners Corporation perform those works would have some impact on the price.
25 The defendants tendered a valuation of Mr St Leon, who claimed to focus on diminution in value as distinct from costs of remediation. He observed, in my view correctly, that cost of repairs was not reflected dollar-for-dollar impact on value. He concluded that the condition of the unit would have an impact of about $50,000 on the price that a purchaser would pay. However, this was unsupported by any sales or other objective evidence, and has the appearance of a mere ipse dixit.
26 In any event, at least so far as damage to Unit 2 is concerned, in my view the cost of reinstatement is the preferable approach. The subject property was and is the Stolfa's home. There is no indication that they have any intention to leave it, or to sell it. They previously owned it in an undamaged condition, and proper compensation is that which enables them to restore it to the condition in which it was. The reasonable cost of repairing the damage to Unit 2 is, therefore, $51,107 (plus interest from 28 April 2010, which increases the sum to $54,500).
27 What then of the impact of the damage to the common property? As has been pointed out, the Stolfas have an absolutely right and the Owners Corporation an absolute liability to remediate that damage. Ordinarily, that might necessitate taking into account that the Stolfas could be liable for 30% of the cost of doing so, being their proportionate unit entitlement. But as it is uncontroversial that the defendants are liable to indemnify the body corporate in that respect, the only provision that need be made in favour of the Stolfas is allowance for the risk, vexation, inconvenience and uncertainty attendant upon the defendants giving that indemnity. As I propose to give judgment against the defendants in favour of the Owners Corporation, that minimises the risk. Nonetheless, I propose to allow 10% of the value of the body corporate works, being $6,000 (plus interest from 28 April 2010, which increases the sum to $6,400), in favour of the plaintiffs in this respect.
28 In principle, it is uncontroversial that the plaintiffs are also entitled to be compensated for removalist expenses and alternative accommodation during the rectification works. The quantum of these, however, is also in dispute.
29 As to removalist expenses, the Bart-Letts quote obtained by the plaintiffs was provided without inspection of the premises and merely assumes 100 cartons. The Ivanov quote relied on by the defendants followed an inspection of the premises, and was for a period of six weeks. Although the evidence as to the duration of the remediation works is slight, Mr Makin thought they would take approximately six weeks; whereas Mr Jalousis, the plaintiffs' real estate valuer, referred to a period of eight to ten weeks. I prefer the opinion of a quantity surveyor to a real estate valuer on this issue, and accordingly I accept Mr Ivanov's quote of $4,400 for removalist expenses.
30 As to alternative accommodation, the defendants propose a serviced apartment in a reputable Meriton complex at Bondi Junction, at a cost of $150 per day for six weeks, amounting to $6,300. The plaintiffs' claim $260 to $492 per night for twelve weeks (amounting to $21,840 to $36,036) plus parking at $25 to $40 per day, totalling $2,100 to $3,360.
31 It follows, from my acceptance of Mr Makin's opinion that the works would take six weeks, that I would allow only six and not twelve weeks. Given the quality of the accommodation provided by the subject premises, I think the daily rate of $260 - at the lower end of the plaintiffs' range - is acceptable. While, ordinarily, the rental value of the subject premises might be a good indication, not only is there no evidence of it, but the prospects of a short term lease for six weeks are unrealistic. Temporary accommodation in an apartment is a reasonable solution. The $260 per night is applicable to the Medina Grand Sydney, a 4.5 star facility, for a standard two-bedroom apartment. Car parking there is $25 per day. Under this head, I therefore allow $10,920 for accommodation and $1,050 for parking.
32 The plaintiffs submit that if I were to require the Owners Corporation to remediate the damage to the common property, the satisfaction of a qualified person - for which purpose they propose the structural engineer Mr Branch - be required. While it appears to be common ground that some such mechanism is appropriate, the defendants submit that Mr Branch is inappropriate, because he is a structural engineer and the work involved is not structural engineering. There is considerable force in that objection, but no alternative qualified person has been proposed, and the parties were content to proceed on the basis of a scope of works prepared by Mr Branch. Accordingly, the orders will provide that the remediation works are to be done to the reasonable satisfaction of Mr Branch.
33 Further, the plaintiffs submitted that the work should be required to be done by persons other than Stephen Hempton. Although my mind has vacillated on this question, I have concluded that it is preferable that Stephen Hempton not perform the works, as his involvement is likely to exacerbate the already frosty relations between these neighbours, and it is therefore preferable that the work be done by an independent builder.
34 Finally, the plaintiffs submitted that the orders ought be framed in a manner which would permit all rectification works - those to Unit 2 and those to the common property - to be performed concurrently under the one contract. There is obviously enormous practical sense in this, and the alternative is likely to be more expensive for all concerned. However, the fact remains that the Stolfas are responsible for and entitled to carry out the repairs to Unit 2 according to their wishes, whereas the Owners Corporation is responsible for the repairs to the common property. I do not believe that I can compel either to entrust their part of the works to the other, although by arrangement between them, if achievable, that might be done. The practical course would be for the Owners Corporation and the Stolfas to agree on an appropriate builder to perform all the works concurrently. However, I do not see that I can compel them to do so.
35 The defendants submitted that orders should be framed in a manner which had regard to the circumstance that the Stolfas would be indebted to them for costs of the proceedings, and also pursuant to the undertaking as to damages. Whether there is any liability pursuant to the undertaking as to damages, and if its extent, remains to be established. So far as costs are concerned, there has been no suggestion that they have yet been assessed, and I know not at what stage the assessment process is. The defendants may apply for a stay on the usual grounds if they consider it appropriate.
Conclusion
36 My conclusions may be summarised as follows.
37 The Hemptons and Stephen Hempton are liable to compensate the Stolfas in respect of damage to Unit 2, but not to common property. All the works referred to in Part 3 of Mr Branch's supplementary report, as well as those referred to in Part 1, are referable to common property and not to Unit 2. The reasonable cost of repairing the damage to Unit 2 is $54,500 (inclusive of interest from 28 April 2010). In addition, the plaintiffs are entitled to $4,400 for removalist expenses, $10,920 for accommodation and $1,050 for parking. They are also entitled to $6,400 (inclusive of interest from 28 April 2010) for vexation, inconvenience and risk in connection with the rectification of the damage to the common property and the defendants' indemnification of the Owners Corporation in that respect. These amounts total $77,270.
38 The Owners Corporation is obliged to maintain the common property and thus to remediate any damage to the common property, albeit that it was caused by the Hemptons and/or Stephen Hempton. However, the defendants are liable to indemnify the Owners Corporation in that respect. Accordingly, there will be judgment against the defendants in favour of the Owners Corporation for the costs of remediation of the damage to the common property.
39 My orders are: