The Owners Corporation Strata Scheme 56120 v Allianz Australia Insurance Limited & Anor

DECISION : Second defendant entitled to bring proportionate liability defence.

CATCHWORDS : Practice and procedure - Pleading of proportionate liability defence under section 35 of the Civil Liability Act 2002 (NSW) - Until the Civil Liability Regulations 2009 were made on 1 September 2009 this action was not an "apportionable claim" under s 35 of the Civil Liability Act as the cause of action accrued before 26 July 2004: Reg 3 Civil Liability Regulations 2003 - Nor was it a claim to which the now repealed s 109ZJ of the Environmental Planning and Assessment Act 1989 (NSW) (EP&A Act) applied as the action was commenced after 26 July 2004: Item 8 of Sch 1 to the Civil Liability Act - It is however a "building action" as defined by s 109ZI of the EP&A Act - Thus, until 1 September 2009 there was a lacuna in the legislative scheme for proportionate liability in relation to building contracts, which has now been filled - The action, by Reg 5 of the 2009 Regulations, is now an action to which Part IV of the Civil Liability Act applies

Civil Liability Act 2002 (NSW) Civil Liability Regulations 2009 LEGISLATION CITED : Civil Liability Regulations 2003 Environmental Planning and Assessment Act 1989 (NSW) Strata Schemes Management Act (1996)

The Owners Corporation Strata Scheme 56120 (Plaintiff) PARTIES : Allianz Australia Insurance Limited (First Defendant) Rickard Hails Moretti Pty Limited (formerly known as Bonacci Rickard (NSW) Pty Limited (Second Defendant)

Mr M Ashhurst SC, Ms M Dolenec (Plaintiff) COUNSEL : Mr Savala (First Defendant) Mr J Giles (Second Defendant)

Sachs Gerace Lawyers (Plaintiff) Moray Agnew (First Defendant) SOLICITORS : Minter Ellison (Second Defendant)

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION TECHNOLOGY AND CONSTRUCTION LIST

55027/06 The Owners Corporation Strata Scheme 56120 v Allianz Australia Insurance Limited & Anor JUDGMENT The notice of motion 1 There is before the Court a notice of motion filed on 18 November 2009 in respect of which the second defendant seeks leave to file an amended construction and technology list response. 2 In the fashion in which the motion was argued the parties agreed that in the first instance the Court needed only to determine two matters of substance:

The first was whether the second defendant should be held out of pleading that the strata manager is a concurrent wrongdoer for the reason that the plaintiffs client would be irremediably prejudiced if that pleading were permitted

The second was the question of whether the Owners Corporation could be a concurrent wrongdoer. Background 3 The nature of the dispute as identified in the plaintiffs further amended technology and construction list statement is as follows:

The dispute concerns defective remedial building work at a property at 240 Pacific Highway, Crows Nest.

The property consists of a seven storey residential apartment block with basement and ground floor parking and comprise 28 residential units and attendant common areas described in strata plan 56120 ["the Premises"].

The plaintiff is the Owners Corporation for the strata plan and entitled to bring these proceedings on behalf of the individual lot owners of the Premises pursuant to Ss227 and 228 of the Strata Schemes Management Act (1996).

As a result of water leaks and other defects that affected the habitability of the Premises, a claim was made against the original builder with the Department of Fair Trading. An insurance claim was accepted and a remedial builder, BMP Industrial Pty Limited ["BMP"], was appointed in December 2001 to carry out the remedial works in accordance with the Building Works Contract dated 5 December 2001 ["the Building Contract"].

The first defendant provided Building Owner's Home Warranty Insurance in respect of the work carried out by BMP ["the HOW Insurance Policy"].

The second defendant (in its former emanation as Bonacci Rickard (NSW) Pty Limited) prepared the scope of works for BMP and was appointed as the Superintendent of the works under the Building Contract and otherwise agreed to inspect and supervise the works in accordance with the Formal Instrument of Agreement dated 16 September 2001 ["the Supervision Contract"] and in accordance with the measure of care, skill and attention required of a Consulting Engineer.

The work carried out by BMP was incomplete and defective, not in accordance with the Building Contract and in breach of the warranties imposed by section 18B of the Home Building Act 1989 and, as a result, the Premises are substantially defective and the plaintiff has thereby suffered loss and damage.

The plaintiff says that the first defendant is liable to indemnify it under the HOW Insurance Policy in respect of any loss or damage arising from BMP's breaches of the section 18B warranties. The plaintiff lodged a claim with the first defendant. That claim was substantially rejected and the first defendant failed and refused to indemnify the plaintiff for the incomplete and defective works set out in the claim.

The plaintiff says that the second defendant's scope of work for the remedial works was negligently prepared, alternatively the second defendant negligently agreed to vary that scope of works at the request of BMP and/or failed to adequately inspect and supervise BMP's work in accordance with the Supervision Contract or with the measure of care, skill and attention required of a Consulting Engineer and thereby permitted BMP to carry out building work that was incomplete and defective, not in accordance with the Building Contract and in breach of the warranties imposed by section 18 B of the Home Building Act 1989. Dealing with the first issue 4 The second defendant seeks to plead a proportionate liability defence under section 35 of the Civil Liability Act 2002 (NSW). 5 In my view the second defendant's submissions are each of substance and they are adopted in what follows: The enactment of the Civil Liability Regulations 2009 6 Until the Civil Liability Regulations 2009 were made on 1 September 2009 this action was not an "apportionable claim" under s 35 of the Civil Liability Act as the cause of action accrued before 26 July 2004: Reg 3 Civil Liability Regulations 2003. Nor was it a claim to which the now repealed s 109ZJ of the Environmental Planning and Assessment Act 1989 (NSW) (EP&A Act) applied as the action was commenced after 26 July 2004: Item 8 of Sch 1 to the Civil Liability Act. It is however a "building action" as defined by s 109ZI of the EP&A Act. Thus, until 1 September 2009 there was a lacuna in the legislative scheme for proportionate liability in relation to building contracts, which has now been filled. The action, by Reg 5 of the 2009 Regulations, is now an action to which Part IV of the Civil Liability Act applies. 7 To the extent that the plaintiff objected contending that it is prejudiced by the identification of Strata Associates as a concurrent wrongdoer because any claim by the plaintiff against Strata Associates is now statute barred, there is no substance in that objection. In this regard the following matters required to be borne in mind:

i. the proportionate liability plea has been brought at the first opportunity;

ii. there is no delay which might justify depriving the second defendant of a statutory defence otherwise available to it;

iii. a proportionate liability defence is available irrespective of the plaintiff's ability to recover from the concurrent wrongdoer;

iv. the position in which the plaintiff finds itself is contributed to by its own delayed commencement of this action, which is arguably statute barred already;

v. that plaintiff may be statute barred is a consequence of the legislative scheme and the recent amendment to that scheme. 8 Here the advent of the new regulations simply cannot be regarded as in any way shape or form a matter for which the second defendant is responsible. 9 In consequence the plaintiffs objection to the second defendant pleading the proportionate a liability defence under section 35 of the Civil Liability Act 2002 (NSW) fails. Dealing with the second issue- whether the Owners Corporation could be a concurrent wrongdoer 10 The plaintiff's contention was that the lot owners were not bringing of claim themselves in the proceedings. 11 The plaintiff's further amended technology and construction list statement under the heading "Nature of the dispute" was in the following terms:

The plaintiff is the Owners Corporation for the Strata Plan and entitled to bring these proceedings on behalf of the individual lot owners of the premises pursuant to sections 227 and 228 of the Strata Schemes Management Act (1996). 12 Notwithstanding that paragraph A 3 did not appear in the plaintiff's contentions proper the second defendant was prima facie justified in contending that the plaintiff was suing on behalf of other persons. However the plaintiff at the end of the hearing contended that it could not say that it was impossible for the second defendant to articulate a cause of action against the strata manager or the plaintiff until the technical matters had been dealt with [transcript 32.45 - 33.5]. The Court has not been addressed on this matter. In my view the second defendant was and remains entitled to bring a proportionate liability defence. The way forward 13 Following the initial hearing of the notice of motion the Court was advised that the second defendant had served a further amended construction list response in accordance and that the further amended response was accepted by the plaintiff as providing sufficient particulars of the causes of action which had been pleaded. 14 These being the essential matters which, as I understood it, were before the Court for determination, the parties will be required to update their respective positions on any matter which may still require determination in relation to the notice of motion. ************

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