(iv) As between the Builder and the Developers, what apportionment should there be in respect of any co-ordinate liability to the Owners Corporation?
43 Both the Builder and the Developers seem to have proceeded on the basis that equitable contribution other than in equal shares is warranted in this case (though putting very different submissions as to how the apportionment of liability as between them should be calculated). I am not satisfied that as between those parties any order for equitable contribution should be otherwise than on an equal share basis.
44 Accordingly, insofar as the Developers (and Builders) have a common liability to the Owners Corporation for breach of the statutory warranties, that is a liability for which (in accordance with the principles of equitable contribution) as between themselves each would bear an equal share.
45 However, to the extent that the Developers have suffered damage (measured by their liability in these proceedings to the Owners Corporation) as a result of the Builder's breaches of statutory warranty, they should be compensated for that loss by means of an indemnity in respect of the liability they bear to the Owners Corporation. In determining the extent of that indemnity, what should be excluded is any liability for the costs of installation of the balancing valves and the re-commissioning necessary in that regard, since those amounts were not caused by the Builder's failure properly to commission the system but rather by the decision to amend the design specifications of the system which was approved by the Developers' consultant and in accordance with which the air-conditioning system was installed by the Builder.
Proceedings
46 The history by which the present dispute came to be before this Court is relevant in light of the limitations defence that is maintained by the Builder against the Developers' cross-claim.
47 As noted earlier, the Owners Corporation first commenced proceedings in the District Court by Statement of Claim filed on 30 March 2007, there claiming the sum of $750,000. It is conceded, as I understand it, that in all material respects the nature of the pleadings set out in the District Court Statement of Claim was the same as those framed in this Court.
48 After the filing of defences to the claim, cross-claims were filed by the Developers against the Builder. The first Cross-Claim/Statement of Cross-Claim was filed in the District Court in the interests of Hung Wai (one of the Developers) on 9 May 2007, in which it claimed contribution or indemnity from the Builder in respect of any amount which might be adjudged due from the cross-claimant to the Owners Corporation and similarly a contribution or indemnity for costs in respect of the Owners Corporation's proceedings against the cross-claimant. (Therefore, the first of the Developers' Cross-Claims was filed within seven years of the date of practical completion of the building works.) The Cross-Claim filed for the Waterhouses (which was in identical terms to that filed for Hung Wai) was not filed until 13 July 2007 (a date which on any view of things appears to be more than 7 years from the date of completion of the work).
49 There was no debate before me as to whether the claim brought by the Owners Corporation against the Developers was within time (although the Owners Corporation's Commercial List Statement pleads otherwise). Rather, it seems to have been conceded by the Builder (having regard to the submissions made in relation to the Developers' cross-claims) that the building work was completed at the latest by the date on which the certificate of occupancy was issued (2 June 2000).
50 Nevertheless, for completeness, I note that the issue as to what is meant by the date of completion of the work for the purposes of s 18E was considered by the Consumer, Trader & Tenancy Tribunal in Owners Corporation Strata Plan 65255 v Kell & Rigby Pty Limited (Home Building) & ors [2008] NSWCTTT 544 (29 September 2009). There, Senior Member Durie rejected a submission by the builder that in determining the limitations period reference was to be had to the date of completion of the particular items of work of which complaint was made (referring to what was said in Honeywood v Munnings [2006] NSWCA 215, at [470], that all defects due to poor workmanship and the use of poor materials at different times during construction formed part of the one 'composite breach of contract when the builder delivered possession of a poorly constructed home".) Senior Member Durie held that completion did not mean practical completion (a term well understood in the building industry which could readily have been used had that been the intention of the legislature) but nor did it mean that all contractual obligations had been completed so that a certificate of occupancy could be issued. Rather, the Tribunal held that 'completion' of the work for the purposes of s 18E meant the date upon which the construction of the building "effectively came to an end" and adopted as that date the time by which permanent power to the building had been connected (a date shortly before the strata plan was registered). There was no suggestion in that case that the defects liability period (or, more precisely, completion of works to rectify any defects during that period) was to be taken into account.
51 I would have been inclined to consider that practical completion was a relatively clear signpost that the building works, as such, had reached completion but the difference between practical completion (20 May 2000) and what might be said to be the latest date on which effective completion (if the reasoning in the CTTT in Owners Corporation Strata Plan 65255 v Kell & Rigby Pty Limited (Home Building) applies) was reached in this case (2 June 2000) is not material in this case since, on either view, the relevant date was less than seven years from the date on which the Owners Corporation commenced its proceedings (and Hung Wai filed its first Cross-Claim).
52 Accordingly, the claims made by the Owners Corporation for breach of statutory warranty (and the Hung Wai cross-claim, assuming for present purposes it were to be characterised as a claim for breach of warranty to which s 18E of the Act applied) were clearly within time. Therefore, on the facts, any issues as to the existence of a limitations defence can only arise in relation to the Waterhouses' cross-claim (or any new cause of action raised by the amendment to the Developers' Cross-Claim during the course of the hearing).
53 On 23 May 2008, the Owners Corporation filed a Summons in this Court seeking the transfer of the District Court proceedings to this Court. An order for the transfer of the proceedings was made by consent on 13 June 2008. On 24 June 2008, the Owners Corporation amended its Summons to claim relief by way of damages against the defendants and filed their Technology and Construction List Statement. Responses to the Owners Corporation's List Statement were in due course filed by the defendants, together with cross-claims as between the Developers and the Builder.
54 The Developers' Cross-Claim, filed on 14 August 2008, claimed relief against the Builder by way of contribution or indemnity for any sums recoverable by the Owners Corporation against any of the Developers pursuant to s 5 of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW) or, in the alternative, on the basis of co-ordinate liability. (It was conceded by Mr Loewenstein that the claim pursuant to s 5 of the Law Reform (Miscellaneous Provisions) Act has no foundation where, as here, the Owners Corporation's claim is based on breach of a statutory warranty and not in tort. Thus no reliance is now placed on this claim.)
55 The Builder's Cross-Claim against the Developers, filed on 31 October 2008, seeks an order for equitable contribution in respect of the common or co-ordinate liabilities of the Builder and Developers to the Owners Corporation with an order for full contribution from the Developers in respect of liabilities related to the air-conditioning system (on the basis that it is alleged that the air-conditioning system built by the Builder through its sub-contractor was built in a proper and workmanlike manner and in accordance with the plans and specifications set out in the building contract (para 5) and that the plans and specifications for the air-conditioning system were created and/or approved by the Developers' architect and consultant mechanical engineer (para 6)). It is asserted that even if there had been a commissioning of the system following its construction of a kind that had identified the defects in the system (and hence in the underlying plans and specifications), to the extent that the Developers decided to do any further work on the air-conditioning system as a result that would have been at the Developers' cost (and therefore this is not a cost for which the Builder should be made liable) (particulars to para 8).
56 On 5 February 2009, Hung Wai filed its Defence to the Second Cross-Claim/Statement of Cross-Claim, in which it denied that the specifications for the air-conditioning system were created and/or approved by its architect but relevantly admitted that the plans and specifications were created and/or approved by its consultant mechanical engineer (George Floth). A defence in the same terms was filed for the other Developers on 25 February 2009.
57 By way of a Third Cross-Claim, filed on 25 February 2009, the Developers sought contribution and indemnity from George Floth in relation to its approval of the 'as installed' drawings for the air-conditioning and ventilation system furnished by the Builder's sub-contractor, Quitstar Pty Limited. Judgment was entered for George Floth on that cross-claim pursuant to orders made by McDougall J on 26 November 2009, following the hearing of separate questions for determination as to the construction of a limitation of liability clause in the contract between the Developers and George Floth. (No evidence was called during the hearing before me from the architect or from George Floth in relation to the air-conditioning system or the circumstances surrounding its installation and commissioning.)
58 An Amended Technology & Construction List Cross-Claim Statement was filed on 25 March 2010 by the Developers in which they expressly repeated, for the purposes of the Cross-Claim only, paragraphs 1-15 of the Owners Corporation's contentions in its Technology & Construction List Statement and went on to assert that, in the event that the Owners Corporation succeeded against any one or more of the Developers, then the Developers claimed an entitlement to contribution to or indemnity for any damages payable by them to the Owners Corporation. That entitlement to contribution or indemnity was said to be pursuant to reliance upon the breach by the Builder of the statutory warranties pleaded in paragraphs 10 and 11 of the Owners Corporation's Contentions (or in the alternative pursuant to s 5 of the Law Reform (Miscellaneous Provisions) Act - a claim not now pressed for the reasons noted above) or (again, in the alternative) in reliance on the principle of co-ordinate liability. Accordingly, it was not until the amendment made to the Developers' cross-claims in March this year that the basis for the claimed entitlement to contribution or indemnity was put by reference to the alleged breach of statutory warranties under the Act, though they had at all times since their cross-claims were filed in the District Court sought contribution or indemnity for any amount in respect of which they might be held liable on the Owners Corporation's claims for breach of warranty.
59 During the course of the hearing, the Developers sought leave (which I granted over the Builder's objection) further to amend their Amended Technology & Construction List Cross-Claim Statement in order to insert the words "damages or" before the words "contribution to or indemnity" in paragraph 3. Mr Loewenstein made it clear that the extent of the damages so claimed was limited to the amount that the Owners Corporation might successfully recover from the Developers in these proceedings on their breach of statutory warranty claim. The amendment was put on the basis that it was for more abundant caution, where the indemnity sought from the Builder was a full indemnity (that being the measure of the damages claimed to have been sustained as a result of the alleged breach of the statutory warranties). This was said to be simply an amendment to provide an alternative legal vehicle by which the claim for an indemnity could be allowed, it arising from exactly the same matrix of facts.
60 Reliance was placed on Air Link Pty Limited v Paterson (No 2) [2003] NSWCA 251. There, Mason P considered the line of authorities relating to amendment of pleadings following McGee v Yeomans [1977] 1 NSWLR 273, in which Glass JA described the settled rule of practice to which reference had been made in Weldon v Neal (1887) 19 QB 394 (precluding leave to amend if the proposed amendment would prejudice the rights of the opposing party existing at the date of amendment) and "all the finespun distinctions which it had engendered" as having been "totally destroyed" by the precursor in the Supreme Court Rules 1970 (NSW) to what now appears in s 65 of the Civil Procedure Act 2005 (NSW) and the corresponding Uniform Civil Procedure Rules 2005 (NSW) permitting amendments in respect of claims which arise out of the same or substantially the same set of facts as those involved in the original claim.
61 In Greater Lithgow City Council v Wolfenden [2007] NSWCA 180, the Court of Appeal confirmed that amendments to permit the pleading of a cause of action which was statute barred could be allowed under the more general power under s 64 of the Civil Procedure Act to grant leave to amend at any stage. Handley AJA there said (at [18]) that, by using substantially the same language in ss 64 and 65 of the Civil Procedure Act (and, in particular, the provisions of s 65(4)), as that used in Pt 20 rr 1 and 4 of the Supreme Court Rules, the legislature must be taken to have endorsed the McGee line of authority (which had been reaffirmed in Proctor v Jetway Aviation Pty Limited [1984]1 NSWLR 166; Fernance v Nominal Defendant (1989) 17 NSWLR 710 and Bebonis v Angelos (2002) 56 NSWLR 127) and that this Court should apply the settled construction of the former rules to the current sections.
62 In Riverina Wines Pty Limited v Tetra Pak Marketing Pty Limited and Ors [2007] NSWSC 1014, it was said that in order to determine whether a new cause of action arises from the same, or substantially the same, facts as those giving rise to the existing cause of action, some comparison between the original proceeding and the proposed amendment needs to be made. (This was the approach adopted by White J in New Cap Reinsurance Corporation v Reaseguros Alianza SA (2004) 186 FLR 175, at [91].) Reference was made to the approach of Wilcox, Tamberlin and Emmett JJ, in Rodgers v Federal Commissioner of Taxation (1998) 158 ALR 220, to the question (in the context of the Federal Court Rules [1979] (Cth)) as to what was meant by "substantially the same" as one requiring an enquiry as to whether the same facts would need to be addressed in order to ascertain liabilities arising under different claims. That question is to be answered as a matter of general impression. Here, precisely the same facts are relied upon to sustain the claim by the Developers to damages for breach of statutory warranty as their respective claims for contribution and indemnity (and, indeed, the relief sought in that regard is identical in quantum).
63 The objection raised by the Builder to the amendment was principally on the basis, as I understood it, that the amendment went beyond matters of form (because, had the damages claim been pleaded at the outset, it would have been open to the Builder to plead a defence of estoppel based on the instructions it said had been given by the Developers in relation to the approval of the amended air-conditioning specifications). (It was also submitted that the amendment altered the basis from which the court would proceed in determining any apportionment between the parties from the in principle equality of contribution to a basis not founded on any assumption of equality of contribution. I accept that this is the case.)
64 It seemed to me that in substance the claim for damages by way of a complete indemnity was predicated on the same facts (and thus from a factual point of view) took the matter no further than the claim already made for a complete indemnity (based on the proposition for which the Developers contend that, as between the Developers and the Builder, it is the latter who bears full responsibility for the Owners Corporation's loss, having been in breach of the statutory warranties implied in its original contract with the Developers themselves). The Builder was already raising (in its Cross-Claim against the Developers) a claim that the Developers should bear in full any liability in respect of the air conditioning system by reference to its alleged approval of the variation to the air-conditioning system (and thus had raised the matters on which any estoppel/causation claim would be based in answer to a claim for damages) and the Developers had confirmed that no more was sought on the damages claim than was already sought by way of the complete indemnity which had been claimed.
65 In those circumstances it did not seem to me that there was any prejudice likely to be suffered by the amendment and I gave leave for the amendment accordingly.
Background
66 As noted above, the building works contract was entered into on 27 October 1998. It was a lump sum contract with a fixed price of $18.7 million. To the contract was appended a notice pursuant to the Act setting out the applicable statutory warranties under s 18B(a)-(f) of the Act (and notifying the time period within which proceedings for breach of the statutory warranty must be commenced).
67 Quitstar, as noted above, was the Builder's sub-contractor in relation to matters including the air-conditioning and ventilation services to be provided for the development. It appears that it was Quitstar who proposed the variations to the air-conditioning system which included the introduction of the three way valves in place of the original specification for 'stat' valves.
68 Clause 4.02 of the building contract (on which the Developers rely in answer to any suggestion that the Builder can avoid liability by reason of the fact that the air-conditioning works were subcontracted to Quitstar) provides, relevantly, that the Builder, by sub-contracting any part of the works, is not relieved of its responsibilities under the contract.
69 Clause 5.02.01 of the building contract records the agreement of the Developers and the Builder that the Architect (Mr Bruce Swalwell) is authorised to do any or all of the acts listed in sub-clause (a), including to issue instructions to the Builder in respect of the matters listed in (i) - (xvi). These include instructions in respect of "the Works" and "Variations". It is conceded by the Developers that in, exercising the authority granted under this clause, the Architect is acting as agent of the Developers. However, a distinction is drawn in that regard by Mr Loewenstein between the agency role for which provision is there made and the Architect's role under clause 5.02.02 as assessor, valuer or certifier in respect of the matters there listed (including the proper execution and completion of the Works). Moreover, there was no formal "instruction" from the Architect in relation to the introduction of the three way valves.
70 The building works in question involved the demolition of two residential houses on adjacent blocks of land (which had been separately owned by Hung Wai and the Waterhouses, respectively) and the construction of a residential unit complex comprising 14 individual strata title lots (including two penthouse units) and common property. The car-parking levels in the building are accessible only via a car-lift (a matter relied upon by Mr Goddard when costing the rectification works). There is an indoor swimming pool and gymnasium on the basement level. Emphasis was placed by Mr Cheney, on the location of the development (on the waterfront at Kirribilli opposite the Opera House) (and on the money paid by the various individual owners to acquire their residential units, as evidenced by the transfers tendered as Exhibit G) as being of relevance when considering the proportionality of the manner in which the Owners Corporation now claims that rectification of the alleged defective works should be effected.
71 As noted earlier, practical completion was certified in May 2000 and a final occupation certificate was issued on 2 June 2000 (Exhibit E pp264/5). The strata plan was certified on 14 July 2000 and registered, according to Dr Hines (the first secretary and treasurer of the Owners Corporation after registration of the Strata Plan), on 25 July 2000.
72 Shortly prior to practical completion, there was an exchange of correspondence between the Builder and the architect in relation to approval of variations to the air conditioning system as installed. The Builder relies on correspondence from George Floth in May 1999 concerning the air conditioning variations.
73 On 5 May 1999, Quitstar sent a facsimile transmission to the Builder and George Floth attaching schedules of equipment and technical data, including a description of the chiller proposed to be installed (Exhibit E, pp 1897-1899). On 11 May 1999, George Floth wrote to the Architect asking for instructions in relation to the proposed amendment (Exhibit E p 560).
74 The Builder concedes that there was no formal communication of approval by the Architect to the proposed variation. Mr Elliott quite candidly informed me that there was no such instruction in writing to be found in the material before the court. However, he submits that on the balance of probabilities such approval was given, by reference to the 'as built' drawings identifying the chillers (the use of which had been proposed by Quitstar) (Exhibit E p 2866), those as built drawings having been certified by, among others, the Architect and George Floth.
75 Mr Elliott then relies on the evidence by the Builder's air-conditioning expert, Mr Field, as to the normal process for approvals of variations of that kind (paras 6/7 of his affidavit) and the subsequent issue of a certificate of practical completion issued by the Architect that raised no issue as to the variation. Similarly, the use of the three way valves was disclosed in the Quitstar plans (Exhibit E p 3188). Mr Obrart was cross-examined as to the process by which approvals of this kind were given and, though he said that it depended on the nature and size of the changes and the nature of the relationship between the parties (T 99), seemed to accept that the process of approval of drawings was consistent with the process on which the Builder now relies as evidence of the giving of approval to this variation (T 105.43.). (Mr Obrart also accepted that it would be unwise for an architect to sign off on practical completion without obtaining appropriate approval/certification of documentation by experts - T 101, but, in a somewhat resigned fashion, said that this was not as unusual as one would think - T 103, hence I doubt that much can be drawn from the certification of practical completion insofar as approval of the air-conditioning variation is concerned.) Nevertheless, the correspondence from George Floth, the approval or certification of the plans as submitted, and the concession in the Developers' Defence to the Second Cross-Claim that George Floth created and/or approved the plans and specifications, together lead me to the conclusion that the Developers, through their consultant, consented to the design amendment (albeit not necessarily as a formal contract variation).
76 Dr Hines acquired his unit in the Kirribilli Grande in August 2000. He was the first occupant of the building after Mr Waterhouse. He gave evidence, by affidavit sworn 29 April 2008, as to the difficulties he and his family had experienced with the air-conditioning system and attempts by the Owners Corporation to remedy the problems (including the resolution in September 2002 to engage Mr Youl as a consultant to supervise the complete rectification of the air-conditioning system), as well as his observation of problems with ventilation and paintwork in the building. He gave evidence in particular as to the discomfort suffered by his family in January 2001 when there was not chilled air (simply ambient air circulating through the system) and the temperature was 30 degrees - T 78 and to the need for callouts for repairs to the air-conditioning and the striking of a special levy to fund ongoing repairs - T 82 and Exhibit E p443(a) and 443(b).
77 It seems that the problems with the air conditioning system were brought to the Builder's attention by a letter to Mr Sean Gibbeson, the site manager, on 15 March 2001 (Exhibit E p362). (The fact that no evidence was adduced in these proceedings from Mr Gibbeson was a matter of criticism by Mr Cheney, albeit in relation to a different issue, namely the scope of the bathroom works as actually carried out.)
78 Thereafter, the firm MM Brown and Associates was commissioned by the Owners Corporation to repair and commission the air conditioning and ventilation systems. Its managing director, Mr Hartwell, who has worked in the industry since 1961, gave evidence as to his firm's attendances at the building from June 2002 to August 2007 in relation to the air-conditioning problems and that the principal complaint was that the air-conditioning system was not cooling the units. The first inspection took place in about June 2002. Mr Hartwell noted that all operating switches on both chillers had been switched to manual, which he said in his experience was indicative of problems with the automatic settings of the system. He made certain recommendations in relation to a rectification and maintenance programme. Rectification work commenced in December 2002.
79 Annexed to Mr Hartwell's affidavit sworn 29 April 2008 was a report obtained by his firm from KC Balancing in which certain recommendations were made in relation to the air-conditioning system. Objection was raised to the admission of this report (and the conclusions drawn by Mr Hartwell in relation to this report) in part on the basis that it was unfair that the Builder should have to cross-examine multiple experts in relation to opinions expressed as to the air-conditioning system. I allowed the report in question (and the fact that recommendations had been made to the Owners Corporation) as relevant to the issue of what was before the Owners Corporation (since there was a claim made of failure by it to mitigate). However, in relation to Mr Hartwell's statements of opinion as to the necessity for the works described in the recommendations contained in the report of KC Balancing, there was nothing in his affidavit that I considered would enable me to assess the weight of Mr Hartwell's stated opinion as to the necessity of the recommendations and I ultimately excluded that evidence for that reason. Mr Hartwell was not required for cross-examination on his affidavit evidence.
80 According to Mr Hartwell's affidavit evidence, the first faulty three way valve was found in 2004. He recommended the acquisition of the remaining valves held in stock by the supplier of that kind, on the basis that this would avoid the need for alteration to the pipework which would be necessary if different valves were used. It seems that a programme was put in place for the replacement of the three way valves as and when they failed (which suggests an appreciation at that stage of the likelihood of their ongoing failure). Mr Hartwell's affidavit itemised the replacement of the three way valves from July 2004 onwards through to June 2006.
81 Mr Youl, a mechanical engineering consultant, was commissioned by the Owners Corporation to oversee the work of MM Brown. Mr Youl also gave evidence in the proceedings. Annexed to his affidavit were copies of callout records for an 18 month period, showing more than one callout a month, excluding what were described as callouts for preventative maintenance and servicing of the system (Exhibit E p658).
82 Under the contract, the defects liability period expired 26 calendar weeks after practical completion (Clause 9.11, Item H in the Appendix) (ie, in about November 2000). It could reasonably be assumed that, prior to the expiry of that period, there was an inspection of the building for the purposes of identifying defects requiring rectification by the Builder. However, there is no evidence of this. I mention this because one of the criticisms made by Mr Elliott of Mr Goddard's defects report is that what he has done based on an inspection in 2008 is simply to list as defects items which might have been perceived to be defects had they existed at the time of practical completion of the building works back in 2000, without addressing the question as to when (and in some cases how) those defects had appeared. A number of those identified defects (for example, isolated cracked tiles or rusted railings) could well have been due to incidents after the building works were completed. The Builder contends that there is no basis for a finding that a number of these items were a result of any defective work on the part of the Builder or for which it should now be held responsible. I agree. In that regard, one might have thought that any visible cracking or staining at the time of completion of the works would have been the subject of complaint during the defects liability period and, if items of which complaint is now made were not so identified, that the likelihood is that they were due to later events (such as the ordinary use of the units). Whatever may have been the case in relation to inspections at the completion of the works, on the evidence, I am unable to conclude whether or not various of the alleged defects were referable to any breach of statutory warranty by the Builder.
83 I should, for completeness, also note that reference was made in opening submissions to the retention of ownership by Hung Wai of one of the units in the building (and as to the occupation or use of that unit by a member of Hung Wai's staff from time to time) in the context of evidence that there had been complaint made by a Ms Joyce Chan in relation to the air-conditioning in that unit and as to the attendance by representatives of Hung Wai at one or more meetings which considered and approved the works to be undertaken on behalf of the Owners Corporation in an attempt to rectify the air-conditioning problems. (Mr Loewenstein confirmed that the Developers admitted the 'notional occupancy' of unit 7A in the building by Hung Wai.) Nevertheless, it was not ultimately submitted that the making of any complaint as to the operation of the air-conditioning (or approval in general meeting of the members of the Owners Corporation of the rectification works) amounted to any admission against the interests of the Developers (and clearly it could not amount to any admission against the interests of the Builder). There is, in any event, no dispute that there were ongoing problems with the air-conditioning in the building or that works (of the kind commissioned by the Owners Corporation) were required to address those problems.
Claims
84 The claims made by the Owners Corporation in these proceedings, as noted earlier, are based solely on alleged breaches of statutory warranties.
85 The particulars of the alleged defective works said to amount to breach of the statutory warranties are set out at least in part in paragraph 11 of the Amended Summons. I say 'in part' because it seems that these particulars are not intended to be exhaustive, since the Owners Corporation also expressly places reliance on 'the defective work more particularly described in lay and expert evidence served by it in these proceedings'. Nevertheless, insofar as the Amended Summons does particularise the alleged defective work, it comprises the following:
(a) defective supply and installation of the air conditioning system (the defects being said to be both as to method of installation and quality of components) by reason of the matters set out in sub-paragraphs (i) - (xiii) including, relevantly, installing defective or inadequate chillers (i), failing to install balancing valves (v)-(vi), failing to install the correct type of three way valves or (I assume by installing) substandard three way valves (vii), and failing properly to commission the air conditioning system (xiii);
(b) installation of a ventilation system that was not reasonably fit for its intended purpose (by reason of the matters set out in sub-paragraphs (i) - (v));
(c) installation of under-floor bathroom heating that was not reasonably fit for its intended purpose;
(d) defective application of plasterwork (causing plasterwork to walls and ceilings to crack in various locations throughout the building);
(e) defective fixing of wall tiling (causing wall tiles to crack in various locations throughout the building);
(f) defective installation of balcony doors and windows (allowing water penetration in various locations throughout the building);
(g) defective installation of flooring to showers and bathrooms throughout the building (such that surface water does not fall to floor wastes installed therein);
(h) defective installation of flooring to showers and bathrooms throughout the building (such that surface water does not fall to floor wastes installed therein and results in water penetration through the bathroom walls to adjoining rooms);
(i) defective installation of pipework in the units (allowing water penetration through leak in shower pipe to wall);
(j) defective installation of waterproof membrane to garden court (allowing water penetration from garden court to lower units);
(k) defective installation of doors and windows (causing difficulty closing and locking of doors and windows);
(l) defective installation of cornices (resulting in cracking of cornices);
(m) poor (and/or defective) application of sealant (causing water penetration);
(n) defective installation of balcony rails and arch bars (resulting in rust stains);
(o) failure to remove insulation surrounding down lights (resulting in sparking);
(p) inappropriate and/or defective installation of tiling in pool area (resulting in cracked tiles and a slippery surface);
(q) defective installation of mechanical exhaust (resulting in a significant noise);
(r) defective installation of brickwork and stonework in various parts of the building (allowing water penetration); and
(s) defective installation of glazing (allowing water penetration).
86 The principal defects about which the Owners Corporation complain, as noted earlier, relate to the waterproofing in the bathrooms and the installation and commissioning of the air-conditioning system. (Relevantly, in relation to the latter, Mr Cheney confirmed during the course of submissions that the Owners Corporation relied on breaches of both fitness for occupation and fitness for purpose and the case was conducted on that basis.)
87 A number of issues of principle have been raised in the context of the statutory warranty claims, which I address at the outset before turning to my assessment of the expert witnesses and the issues for determination.
Standing
88 Section 18C of the Act provides that:
A person who is the immediate successor in title to an owner-builder, a holder of a contractor-licence, a former holder or a developer who has done residential building work on land is entitled to the benefit of the statutory warranties as if the owner-builder, holder, former holder or developer were required to hold a contractor-licence and had done the work under a contract with that successor in title to do the work.
89 The Developers concede that the effect of s 18C of the Act is that the Developers are liable to the Owners Corporation as if they had undertaken the building work under a contract with the Owners Corporation. (Although the Builder's Amended Technology & Construction List Response (para C13) filed 31 October 2008 denies this allegation, it did not appear to be a matter seriously in dispute during the hearing and no basis was put forward as to why the Owners Corporation would not have the benefit of s 18C in this regard.) There is, however, a dispute as to whether the Owners Corporation has standing to raise issues in relation to damage other than to common property.
90 The operation of section 18C would seem to give rise to a number of notional contracts, each encompassing the relevant residential building work done under the initial contract, in cases where, as here, there are individual owners who have acquired strata title to particular units and the Owners Corporation which has vested in it the common property. In other words, by virtue of s 18C, rights under the contract with the Developers have passed to various successors in title, each of whom, unlike the Developers, has a separate and differing title in respect of separate units or property in the strata plan.
91 What then is the residential building work in respect of which each separate successor in title has the benefit of the statutory implied warranties? If the notional contract with each successor entitles that successor to the benefit of the statutory warranties in respect of the whole of the residential building work for the development, then arguably the standing issue would not arise and a claim could be made by each successor for breaches in relation to the overall works (though there would surely then be an issue as to what damage one successor might have suffered by breach of a statutory warranty in relation to work over an area of the building in which it has no immediate interest). The more likely construction of s 18C, it seems to me, is that each successor in title has the benefit of the statutory warranties but only insofar as they pertain to work (albeit done under an entire contract) in relation to that successor's now separately owned property.
92 It is well accepted that the Owners Corporation, as legal owner, has standing to sue in relation to matters concerning the common property, as discussed by Spigelman CJ (with whom McColl and Ipp JJA agreed) in Owners-Strata Plan No 43551 v Walter Construction Group Limited [2004] NSWCA 429, at [49]. Individual owners, similarly, have standing to sue in relation to matters concerning their strata title. Thus in Owners Corp SP 77144 & Ors v Andelini (Home Building) [2008] NSWCTTT 1506, without discussion, Senior Member Paull proceeded on the basis that the individual lot owners and the relevant Owners Corporation there had standing to sue in respect of defective work for damages for the reasonable cost of rectification of the work that "pertained to their individual lot and in the case of the Owners Corporation, the reasonable cost of the rectification of the common property in issue".
93 It seems to me difficult for the Owners Corporation to argue that it has standing, as the entity having title to the common property, in its own right to sue in relation to matters concerning property of which various individual Owners Corporation have title. Therefore, on the standing issue I would accept the Builder's contention that it is not for the Owners Corporation to make complaint as to breach of statutory warranties in relation to building work in areas other than common property. (In any event, it is difficult to see how any loss could have been suffered by the Owners Corporation, as opposed to individual owners, for breach of warranties in relation to individual titles within the complex.) I have dealt with the relevant Scott Schedule claims on that basis.
Warranties
94 Whilst reliance is placed on each of the statutory warranties implied into the building contract (by s 18B(a)-(f) of the Act, inclusive) in the Amended Summons, in his opening submissions Mr Cheney informed me that the Owners Corporation did not press any claim based on the warranties provided for by s 18B(b), insofar as it relates to the use of 'new' materials, or s 18B(d). (This concession seems to have caused some misunderstanding as to whether any claim based on the warranty provided for under s 18B(b) was being pressed at all, a matter of relevance when considering the question of the three way valves - and I consider this issue later in that context.)
95 As I understand it, what the Owners Corporation now relies upon are alleged breaches of the following warranties:
s 18B(a) : a warranty that the work will be performed in a proper and workmanlike manner and in accordance with the plans and specifications set out in the building contract;
s 18B(b) : (unless abandoned altogether, which Mr Cheney does not concede) a warranty that all materials supplied will be good and suitable for the purpose for which they are used (though the Owners Corporation does not rely on any warranty that they be new);
s 18B(c) : a warranty that the work will be done in accordance with, and will comply with, the Act or any other law (and, in relation to the latter, the Owners Corporation relies upon the binding force of the Building Code of Australia provisions deriving from the 2000 regulations in force under the Environmental Assessment and Planning Act 1979 (NSW) which provide that a complying development certificate for development that involves any building work must be issued subject to the condition, inter alia, that the work must be carried out in accordance with the requirements of the Code);
s 18B(e) : a warranty that the building works will result, to the extent of the work conducted, in a dwelling that is reasonably fit for occupation as a dwelling; and
s 18B(f) : a warranty that the building work and any materials used in doing the building work will be reasonably fit for the specified purpose or result (though I note that such a warranty is only implied if the person for whom the work is done expressly makes known to the holder of the contractor-licence or person required to hold a contractor-licence, or another person with express or apparent authority to enter into or vary contractual arrangements on behalf of the holder or person, the particular purpose for which the work is required or the result that the owner desires the work to achieve, so as to show that the owner relies on the holder's or person's skill and judgment).
Reasonable fitness for occupation
96 In relation to the warranty implied by s 18B(e), there is a question as to what amounts to reasonable fitness for occupation in the context of the Owners Corporation's present claims (ie, that there is excessive dampness or moisture in the bathrooms or that the air-conditioning failed properly to cool the air inside the units or as to the existence of drummy render or the like).
97 Mr Cheney maintains that the use of the qualifier as to reasonableness means that it is not necessary for the Owners Corporation to show that the building was rendered uninhabitable by the defects of which complaint is now made. I note that this is the conclusion which was reached, in considering the import of the statutory warranties under the Act, by Senior Member Bordon in the Consumer Tenancy and Trader Tribunal in Mesaros v A V Jennings Properties Ltd (Home Building) [2008] NSWCTTT 865. In that case, the Tribunal found on the evidence that there had been extensive damage occasioned by the building works, including a "substantial significant settlement and/or swelling of the foundations" and a significant tilt to the concrete slab on which the house was built. (Thus it is apparent that the damage was far more extensive than the damage reported in the Goddard report in this case.) Senior Member Bordon said: