The Owners Strata Plan 62930 v Kell & Rigby Holdings Pty Ltd [2010] NSWSC 612 | Case summary

The Owners Strata Plan 62930 v Kell & Rigby Holdings Pty Ltd [2010] NSWSC 612 | Case summary | Zoe

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Abigroup Ltd v Abignano (1992) 39 FCR 74 Acohs Pty Ltd v RA Bashford Consulting Pty Ltd (1997) 144 ALR 528 Air Link Pty Limited v Paterson (No 2) [2003] NSWCA 251 Albion Insurance Co Ltd v Government Insurance Office (NSW) (1969) 121 CLR 342 Aon Risk Services Australia Limited v Australian National University [2009] HCA 27; (2009) 239 CLR 175 Armstrong v Commissioner of Stamp Duties (1967) 69 SR (NSW) 38 Bartlett v Sidney Marcus Limited [1965] 1 WLR 1013; [1965] 2 All ER 753 Blake v Norris (1990) 20 NSWLR 300 Bebonis v Angelos (2002) 56 NSWLR 127 Bellgrove v Eldridge [1954] HCA 36; (1954) 90 CLR 613 Belan v Casey [2003] NSWSC 159 Bialkower v Acohs Pty Ltd & RA Bashford Consulting Pty Ltd (1998) 83 FCR 1; (1998) 154 ALR 534; (1998) 41 IPR 33 Brandi v Mingot (1976) 12 ALR 551 Brewarrina Shire Council v Beckhaus Civil Pty Limited [2005] NSWCA 248 Building Insurers' Guarantee Corporation v Strata Plan No 57504 [2010] NSWCA 23 Burke v LFOT Pty Limited (2002) 209 CLR 282 Cadbury Schweppes Pty Ltd v Darrell Lea Chocolate Shops Pty Ltd (No 4) (2006) 229 ALR 136; [2006] FCA 446 Craythorne v Swinburne (1807) 14 Ves 160 ; (1807) 33 ER 482 Central Coast Leagues Club v Gosford City Council (unreported, NSWSC, 9 June 2008) Commonwealth of Australia v McLean (unreported, NSWCA, 31 December 1996) Davies v Evan Humphreys (1840) 6 Meeson Welsby 153; (1840) 151 ER 361 De Cesare v Deluxe Motors Pty Ltd (1996) 67 SASR 28 Dering v Winchelsea (1787) 1 Cox Eq Cas 318 Director of War Service Homes v Harris [1968] Qd R 275 Duke Group Ltd (In Liq) v Pilmer (1998) 27 ACSR 1 Ex parte Snowdon; In Re Snowdon (1881) 17 Ch D 44 Feast Contractors v Ray Vincent Limited [1974] 1 NZLR 212 Fernance v Nominal Defendant (1989) 17 NSWLR 710 Gagner Pty Ltd t/as Indochine Café v Centuri Corp Pty Ltd (2009) 262 ALR 691; (2009) 236 FLR 401; [2009] NSWCA 413 Gladstone Park Shopping Centre Pty Ltd v Ross Wills (1984) 2 FCR 334, (1984) 55 ALR 387 Gray v Queensland Housing [2004] QSC 276 Greater Lithgow City Council v Wolfenden [2007] NSWCA 180 Gregory Paul Montfroy v Roads Corporation (trading as VicRoads) [2005] VSC 320 Hancock v B W Brazier (Anerley) Ltd [1966] 1 WLR 1317 HML v R [2008] HCA 16; (2008) 235 CLR 334; (2008) 245 ALR 204 Ho v Powell (2001) 51 NSWLR 572; [2001] NSWCA 168 CASES CITED : Honeywood v Munnings [2006] NSWCA 215 Hungerfords v Walker [1989] HCA 8; (1989) 171 CLR 125 James Hardie & Co v Wyong Shire Council (2000) 48 NSWLR 679 Janet Campbell v CJ Cordony & Sons Ply Ltd [2009] NSWSC 63 Jones v Bartlett [2000] HCA 56; (2000) 205 CLR 166 Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298 Jones v Mortgage Acceptance Nominees Ltd (1996) 63 FCR 418; (1996) 142 ALR 561 Karacominakis v Big Country Developments Pty Ltd & Anor [2000] NSWCA 313 Katsilis v Broken Hill Pty Co Ltd (1977) 18 ALR 181; (1977) 52 ALJR 189 Kavalee v Burbidge (1998) 43 NSWLR 422 McGee v Yeomans [1977] 1 NSWLR 273 McLean v Discount and Finance Ltd (1939) 64 CLR 312 Mahony v McManus (1981) 180 CLR 30 Manufacturers Mutual Insurance v GIO (1993) 7 ANZ Ins Cas 61-158; (1993) Aust Contract R 90-023 Mesaros v A V Jennings Properties Ltd (Home Building) [2008] NSWCTTT 865 Miller v Cannon Hill Estates Ltd [1931] 2 KB 113 Minister of Employment and Workplace Relations v Gribbles Radiology Pty Ltd [2005] HCA 9; (2005) 222 CLR 194 New Cap Reinsurance Corporation v Reaseguros Alianza SA (2004) 186 FLR 175 Qantas Airways Ltd v AF Little Pty Ltd [1981] 2 NSWLR 34 Oates v Consolidated Capital Services Ltd (2009) 257 ALR 558; (2009) 233 FLR 283; (2009) 72 ACSR 506; [2009] NSWCA 183 Owners Corporation Strata Plan 65255 v Kell & Rigby Pty Limited (Home Building) & ors [2008] NSWCTTT 544 (29 September 2009) Owners-Strata Plan No 43551 v Walter Construction Group Limited [2004] NSWCA 429 Owners Corp SP 77144 & Ors v Andelini (Home Building) [2008] NSWCTTT 1506 Pilmer v Duke Group Ltd (In Liq) [2001] HCA 31; 207 CLR 165; (2001) 75 ALJR 1067; 180 ALR 249 Proctor v Jetway Aviation Pty Limited [1984]1 NSWLR 166 Radford v De Froberville [1977] 1 WLR 126 Riverina Wines Pty Limited v Tetra Pak Marketing Pty Limited and Ors [2007] NSWSC 1014 Rodgers v Federal Commissioner of Taxation (1998) 158 ALR 220 Sterling Estates Development Corporation Pty Limited v Malouf & Anor [2003] NSWCA 278; (2003) 58 NSWLR 685 Tabcorp Holdings v Bowen Investments Pty Limited [2009] HCA 8 The Craftsmen Restoration and Renovations v Thomas Boland [2008] NSWSC 660 The Insurance Commissioner v Joyce [1948] HCA 17; (1948) 77 CLR 39 Weldon v Neal (1887) 19 QB 394 Westpoint Management Ltd v Chocolate Factory Apartments Ltd [2007] NSWCA 253 Whiley Investments (Qld) Pty Ltd v Pet's Paradise (Qld) Pty Ltd [2009] VSC 144 William Gary Quick v Stoland Pty Ltd [1998] FCA 1200 Wilson v Kybren P/L (Home Building) [2002] NSWCTTT 742 Wolmershausen v Gullick [1893] 2 Ch 514

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3 Following registration of the strata plan in July 2000, the Owners Corporation of the Strata Plan (the Owners Corporation), as immediate successor in title to the Developers, became entitled to the benefit of the statutory warranties as if the Developers were required to hold a contractor-licence and had performed the work under a contract with the Owners Corporation, pursuant to s 18C of the Act, to do the work. Pursuant to s 18D of the Act, a person who is a successor in title to a person entitled to the benefit of a statutory warranty under the Act (here, the Owners Corporation) is entitled to the same rights as enjoyed by the person's predecessor in title (here, the Developers). (I interpose to note that in the course of submissions it was contended by Counsel for the Builder, Mr Elliott, that the Owners Corporation does not have standing to sue for breaches of warranty in relation to work carried out in areas other than the common property, an issue relevant in the context of various of the so-called Scott Schedule claims. It is not disputed, however, that in relation to the principal claims made by the Owners Corporation, it has the requisite standing.) 4 Initially the Owners Corporation brought its claims for relief by way of Statement of Claim filed in the District Court on 30 March 2007. The District Court proceedings were subsequently transferred, on the Owners Corporation's application, to this Court pursuant to orders made on 13 June 2008. 5 The Owners Corporations contends that the residential building work was carried out by the Builder and the Developers in breach of various of the s 18B statutory warranties and that as a consequence loss and damage have been sustained for which both the Builder and the Developers are liable. The claim, as particularised in the Owners Corporation's Amended Summons filed 31 October 2008, was in excess of $1.5 million (though it seems to have been conceded during the course of the hearing that the quantum of the claim has been overstated to some extent at least in relation to the cost of rectification of the bathrooms and other items such as 'drummy' render). 6 The Developers and the Builder have cross-claimed against each other for contribution and indemnity. In the case of the Developers, a claim is also made, pursuant to a further amendment made to their Amended Cross-claim during the course of the hearing, against the Builder for damages in respect of the breaches of warranty alleged by the Owners Corporation in its claim (though not exceeding the amount for which the Developers might be held liable to the Owners Corporation, in other words seeking by way of damages the full indemnity alternatively claimed by way of equitable contribution). 7 A limitations defence pursuant to s 18E of the Act is pleaded by the Builder against both the Owners Corporation and the Developers on the basis that the work to which the respective claims relate was completed more than seven years prior to the commencement of the proceedings. The Builder also raises a defence to the claim based on an alleged failure to mitigate and/or the incurring of unreasonable costs by the Owners Corporation. At least the mitigation part of that defence appears to relate only to one aspect of the claim, namely the air-conditioning works. (It is not clear to me what costs are said to have been unreasonably incurred in that regard and it seemed to me that this part of the defence was not pressed at the hearing.) 8 The complaints made by the Owners Corporation in relation to the building work broadly fall within three categories: first, complaints made as to bathroom dampness or moisture (attributable, it is said, to the lack of a waterstop or other effective waterproofing in the bathrooms); secondly, complaints made as to the operation of the air-conditioning system (or, to be more precise, its lack of operation at the outset of occupation of the building and ongoing equipment failures associated with the system); and, thirdly, complaints made as to miscellaneous items of work (including drummy render; cracks in the swimming pool tiling; and problems with underfloor heating in some of the bathrooms), referred to as the Scott Schedule claims. 9 By way of a general summary of its position, the Builder contends that the vast majority of the Owners Corporation's claims should be dismissed and that, on those claims for which it does accept liability (or may be found liable), the quantum of damages recoverable by the Owners Corporation is nowhere near the amount that has been claimed.

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Quantum 16 As to the overall quantum of the claim, the Builder contends that, even if the Owners Corporation establishes that there were breaches of statutory warranty causative of loss in relation to the various claims, the amount claimed has been grossly inflated. 17 As to the bathroom claims (quantified by the Owners Corporation as being in the order of $690,000), the major cost is the claim for the complete re-tiling of the bathroom floors and walls. It is said that it is unreasonable of the Owners Corporation to press for rectification in the manner it has done in that regard. Similarly, as to the amount claimed for rectification of defects identified by the building expert called by the Owners Corporation (Mr Ken Goddard) and referred to as the Scott Schedule claims, there was much criticism of the manner in which this had been costed (particularly in relation to the rate claimed for items such as rectification of drummy render at $892 per square metre). Following the cross-examination of Mr Goddard by Counsel for the Builder, Mr Elliott, in which Mr Goddard was tested as to the basis for his costings, there was implicitly a measure of acceptance by the Owners Corporation of that criticism, insofar as the Owners Corporation now seems broadly to accept that where there is a divergence between the basis of costing any building rectification work as between Mr Goddard and the expert called for the Builder (Mr Greg Beard), Mr Beard's costings should be adopted and I have done so. 18 As to the air-conditioning claims, unlike the position with the other claims where the rectification work has not yet taken place, what is sought is reimbursement of moneys already spent by the Owners Corporation. It seeks to recover amounts paid to Quitstar, MM Brown and Youl & Associates, totalling $290,298.85, being the costs it says were incurred in having the air-conditioning system restored to the position in which it would have been had there been conformity with the statutory warranties. (There is in issue a question whether the amounts invoiced by the air-conditioning consultants at least from 2003 properly reflect amounts for which the Builder is liable even if the claim is otherwise made out.)

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19 The Builder concedes some parts of the claims ($4,884.38 for minor air-conditioning defects and $42,989 for the agreed Scott Schedule claims). The Builder says that if a waterstop is required to be installed in any of the bathrooms the cost for that should be no more than $2,895.60 per bathroom (assuming a complete replacement of the floor tiles in the shower recess area); that the disputed Scott Schedule items (even if allowed) should be costed on the basis explained by Mr Beard. In relation to the main air-conditioning claims, the Builder says that any liability (which is not conceded) should be no more than $119,320.80 (comprising the costs of the balancing valves and commissioning up to 2003 when the valves were installed but no costs thereafter). 20 The Owners Corporation also claims interest on monies paid in respect of the works carried out to rectify the air-conditioning and ventilation works, in accordance with the principles considered by the High Court in Hungerfords v Walker [1989] HCA 8; (1989) 171 CLR 125 (and, more recently in the context of costs incurred in having defective building work rectified, in The Craftsmen Restoration and Renovations v Thomas Boland [2008] NSWSC 660 per Howie J). There did not appear to be any dispute with that proposition (assuming liability was found for those rectification costs on the part of the Builder/Developers). 21 As to the cross-claims between the respective defendants, both concede that any liabilities they may have to the Owners Corporation on the Owners Corporation's claim are co-ordinate liabilities for the purposes of the application of the equitable doctrine of contribution. However, the Developers say that this is a case in which the Builder should bear full responsibility for any liability to the Owners Corporation (by reason of the Builder's breach, on that hypothesis, of the statutory warranties implied into its contract with the Developers); whereas the Builder says that any liability referable to the installation of the particular air-conditioning system in question should be borne wholly by the Developers (since its installation was approved by their consultant) and that any remaining liability should be borne equally as between the Developers and the Builder. In further answer to the Developers' claim for a complete indemnity, the Builder says that the Developers' cross-claim is statute barred.

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(ii) a breach of the s18B(a) warranty in respect of the defective workmanship conceded in the bathrooms of units 2C and 7B; (for completeness I note that I have also found it likely that there was a breach of the s18B(a) warranty, which was not conceded, in respect of the moisture proofing of the underfloor heating connections in the bathrooms of units 2C and 7B - something which is dealt with in the Scott Schedule claims - and that as it can be inferred from the excessive moisture levels in unit 2C that there was a problem with the waterproofing in that unit, there should be allowed an amount to cover the retro-fitting if necessary of a waterstop in that shower recess or other waterproofing work to address that issue). 25 Other than as above, I find no breach of statutory warranties in relation to the bathrooms. 26 The consequence of the breach of warranties noted in (i) above is that the bathrooms in question have not been built in a manner compliant with the Building Code of Australia and bear the risk of water migration within the bathrooms without the benefit of the protection contemplated by the Code (even though alternative waterproofing methods may have been applied and seem, at least in the case of units 3A and 6A, to have provided effective waterproofing to date). I accept the Owners Corporation's contention that a waterstop should be retro-fitted to each of the bathrooms in units 3A, 6A and 7B. I consider that the Owners Corporation's proposal for a complete re-tiling of the floor and wall tiles in the bathrooms is not reasonable and that the approach to be adopted should be limited to the complete replacement of the shower recess tiles (that being the alternative recommended by Mr Beard in paragraph 19 of his 20 May 2010 affidavit) at a cost estimated by him in the table contained in paragraph 49 of his 27 May 2010 affidavit at $2,895.60 per bathroom. 27 The rectification works for units 2C and 7B, consequent upon the breach of warranty noted in (ii) are costed by Mr Beard in his 27 May 2010 affidavit and included within the items in the Scott Schedule. (For unit 2C, this does not appear to extend beyond any sum allowed to retrofit the waterstop. For unit 7B, this includes $1,361.50 (para 131) for item 9.17(i) in the Goddard Report and $541.13 (para 136) for item 9.17(vi) of the Goddard Report.) I also consider that, in view of the excessive moisture readings in unit 2C, there should be an allowance made to permit destructive testing of the shower recess in that unit and the retro-fitting of a waterstop and any other waterproofing works as may be necessary depending on the outcome of that destructive testing. 28 As to the underfloor heating in units 2C and 7B, which I am prepared to infer was affected by the moisture levels and defective works in those bathrooms, I accept the evidence of Mr Tsikas that repair is likely to include the removal of a small number of tiles. If it does, then the cost for so doing should encompass the removal of sufficient floor tiles (making use of any architectural break in the bathrooms) to allow for as close a match to the remaining floor tiles as is reasonably practicable having regard to the approach recommended by Mr Beard. That has not been separately costed and it seems to me that if this work were to be carried out in conjunction with the other bathroom work required for those two bathrooms, there may be costs savings (I have in mind, for example, that Mr Beard has already costed the waterstop rectification costs on a conservative basis, allowing for 4sq m tiles, when the shower recess areas are much less than that). Given that it may not ultimately be necessary to remove the tiles in the main bathroom areas of units 2C and 7B (depending on how the moisture proofing of the underfloor heating connections is ultimately to be achieved), it seems to me that this aspect of the claim should either be dealt with by the provision of a further costs estimate from Mr Beard, allowing an additional sum for the costs of those works as part of the shower recess works in those units, or for an indemnity in respect of the reasonable costs of attending to those works. I will hear submissions on which of those courses of action would best achieve the statutory mandate for the just, quick and cheap resolution of this aspect of the dispute.

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(iii) a breach of the s18B(f) warranty in respect of the installation of an air-conditioning system which was not reasonably fit for the purpose specified in the mechanical specifications of the contract. 30 In respect of (i) (the failure properly to commission), the cause of the air-conditioning failure and ongoing equipment failures in relation to the chillers and the three way valves was attributed by the experts to the lack of balancing valves in the system as installed. Had there been a proper commissioning it is highly likely that those problems would have become apparent and could have been avoided. 31 It is unclear what separate part (if any) any failure properly to calibrate the system had to play in the failures caused by the lack of balancing valves (ie other than the fact that a proper calibration might have demonstrated the problems likely to be encountered by a lack of balancing valves). 32 In the absence of identification by the experts of any particular failure of calibration (and an explanation as to what effect any such failure would have had on the ultimate failures of the system beyond those caused by the lack of 'commissioning' in the sense of acceptance testing), I consider that the damages referable to the failure of commissioning do not extend beyond the costs incurred by the Owners Corporation in investigations to ascertain the cause of the air-conditioning problems (which would not have been necessary had there been a proper commissioning in which those problems would have been identified in the first place) and the cost of the repairs carried out to the chillers at a time prior to the discovery that the lack of balancing valves was the cause of the system's failures (since the evidence is that until the balancing valves were installed any repair to the chillers would be likely to prove unsuccessful and thus the initial repairs to the chiller were costs thrown away). 33 Those particular costs have not, as I understand it, been separately quantified (ie the cost of the investigations in relation to the system failures or thrown away by the initial chiller repairs does not seem to have been separated out from the cost of the installation and commissioning of the balancing valves to correct those failures). Rather, a number of the invoices in evidence before me seem to conflate the two aspects of the work in an overall charge. Ultimately however, the distinction between those components of the costs referable to the balancing valves is not material (other than insofar as it may be relevant to the contribution claims as between the Builder and the Developers) since the cost of installation and commissioning of the balancing valves (which I would have excluded from the damages recoverable for breach of the s 18B(a) warranty) seems to me to be recoverable for breach of the s 18B(f) warranty in any event. 34 (I note that there is conceded an amount of $4,884.38 for breach of the s 18B(a) warranty in relation to insulation seal defects and blockage to vents and the like. As I understand it, this is not included in what I have described as the failure properly to commission.) 35 The cost of replacement of the three way valves is recoverable for the breach identified in (ii) above. 36 As to the breach of warranty in (iii) above, the damages recoverable are the costs referable to the installation of the balancing valves and the re-commissioning of the system necessary to rectify the deficiencies of the system and to render it reasonably fit for the specified purpose (but not costs referable to routine maintenance or repairs of the system).

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(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:

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There was continuous movement. This is reflected in tilting to internal surfaces such as kitchen, workbenches, and movements to cabinets and filler panels. There is substantial cracking in ceilings, plasterboard, architraves, cornices, tiles, soffits, and timber trims. The cracking is ongoing. There is distortion to plasterboard surfaces. It is difficult to open and close doors which require, and will continue to require, adjustment. Internal floors have dropped and there are problems with falls in floor wastes. There is substantial movement cracking to the concrete floor slabs. The cracking is ongoing. There is cracking and rotation to the brick veneer on the outside of the building, including cracking which extends through window sills. There are gaps in the window reveals. There is displacement of downpipes and significant settlement of external paving. A gap has opened up between the garage and the driveway. Gas pipes and water reticulation pipes are broken due to slab movement. The sewer and storm water lines have insufficient and, at times, negative fall and the slab has dropped. The lines will block in the future as a result of this. The structural damage is progressive and is likely to get worse over time… 98 In response to an argument put in that case by the builder to the effect that a default or defect must be such that the purchasers would be substantially unable to occupy the unit, the Tribunal while accepting that an examination of the authorities indicated that 'fit for occupation' and 'fit for purpose' were expressions which did not necessarily mean "uninhabitable" was satisfied that the building was not reasonably fit for habitation or occupation. 99 Similarly, in Wilson v Kybren P/L (Home Building) [2002] NSWCTTT 742 a finding that the supply and affixation of cladding boards (which later shrank to such an extent that within a relatively short time the cladding boards had cracked, bowed and split so as to make the dwelling no longer weatherproof), lead to a finding that the builder had breached the statutory warranty that the work would result in a dwelling that was reasonably fit for occupation as a dwelling. 100 Insofar as the statutory warranty of reasonableness for occupation as a dwelling, in the context of residential building works, seems akin to a warranty of reasonable fitness for habitation, the authorities in other areas (albeit not considering the meaning of the analogous expression in s 18B(e) of the Act), suggest that the test is whether the dwelling in question is in a condition (or has particular features) that would make it injurious to health. 101 So, for example, in Jones v Bartlett [2000] HCA 56; (2000) 205 CLR 166 (where considering the scope of a landlord's duty to ensure a leased residence is reasonably fit for habitation), Hayne and Gummow JJ said (at [173]) that premises will not be reasonably fit for the purposes for which they are let where the ordinary use of the premises for that purpose would, as a matter of reasonable foreseeability, cause injury. There, the notion of reasonable fitness required an enquiry as to the existence of defects which the landlord knows or ought to know make the premises unsafe for the use to which they are to be put; reference being made in particular to what was required to discharge the duty with respect to 'dangerous defects'. 102 Gleeson CJ stated (at 177): There is no such thing as absolute safety. All residential premises contain hazards to their occupants ... [M]ost dwelling houses could be made safer, if safety were the only consideration. The fact that a house could be made safer does not mean it is dangerous or defective. 103 In the Court of Appeal in Sterling Estates Development Corporation Pty Limited v Malouf & Anor [2003] NSWCA 278; (2003) 58 NSWLR 685, to which reference was made in the Mesaros decision, McColl JA (with whom Santow and Tobias JJA agreed) considered the phrase "reasonably fit for habitation" in the context of the construction of the term "Special Fault" in a contract for sale of land. This required determination of the existence of a fault or defect of such a nature that the purchasers would be substantially unable to occupy the unit if it was not repaired prior to completion. There, a concrete floor in a living room had been defectively laid, so that there was a deviation of 12mm, causing an uneven surface, the remediation of which required the moving of furniture, taking up of the carpet and the grinding down of the concrete over a period of two days. There Honours considered that this was not a defect making the dwelling uninhabitable and it was found to not be a substantial danger or something rendering the unit substantially unfit for occupation. 104 Accepting that the test "substantially" unfit for occupation is a higher test than "not reasonably fit for occupation", nevertheless the analysis in Sterling v Malouf is instructive. Reference was made to what was said in Miller v Cannon Hill Estates Ltd [1931] 2 KB 113 (at [121] - [122]) by Swift J as to the fitness for purpose of a dwelling intended for human habitation, that it be completed with proper materials ("materials of good quality and description") and per McNaughton J (at [123]), that it be built properly, with proper materials, and in a proper manner. Reference was also made to the description of Miller v Cannon (in Hancock v B W Brazier (Anerley) Ltd [1966] 1 WLR 1317, at 1326) by Diplock LJ (as he then was, sitting as an additional judge of the Queen's Bench Division) as "constituting a milestone in the law relating to the purchase of buildings under construction." Mc Coll JA noted (at [69] - [71], [88]): Diplock LJ (at 1327) had seen no difference between the formulation of the warranty that the relevant building work should be carried out in a "proper, efficient and workmanlike manner, and the alternative way of stating it, that the house is habitable and fit for humans to live in." Unlike Diplock LJ, Lord Denning MR did not elide the formulation of the warranty, but little turns on this. Even Diplock LJ acknowledged (at 1327) that the different ways in which the warranty was expressed were merely alternative formulations rather than reflecting any substantive difference.

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… So viewed it is clear that each of the sub-paragraphs requires the demonstration of a fault or defect of such a nature as would deny to the purchaser the substantial benefits of the Contract if completion was to occur prior to its rectification. In other words, in order that there be a Special Fault, the fault or defect must be of such a nature that the purchasers would be substantially unable to occupy the unit if it was not repaired prior to completion. 105 In the Supreme Court of Queensland, the term "reasonably fit for habitation" was considered in the context of an implied term in the context of an allegation that a landlord had breached its duty to the tenant who had suffered injury as a result of a fall on slippery tiles. The duty was seen to be one obliging a landlord not to let premises containing a defect in features or fittings which is of such a nature that it is likely to cause injury in the ordinary occupation of the premises (Gray v Queensland Housing [2004] QSC 276) where Chesterman J said at [10]-[12], [22]: The obligation imposed on the defendant by the agreement and the Act, to ensure that the house was and remained fit to live in, is qualified by the imposition of a standard of reasonableness having regard to the (i) age (ii) character (iii) locality of the house and (iv) effect which any breach of the obligation has on the state or condition of the house as a whole . This was said to be the law by the Court of Appeal in Bond v Weeks [1999] 1 Qd R 134 at 138. The Court was there concerned with s 7 of the (repealed) Residential Tenancies Act 1975 (Qld), which imposed obligations on a lessor to provide and maintain a dwelling house 'in good repair and in a condition fit for human habitation', and to maintain the fixtures and fittings during the course of the tenancy 'in good tenantable repair.' I would regard 'fit for human habitation' as exactly synonymous with 'fit for the tenant to live in', and the phrase 'good tenantable repair' as exactly equating to 'a reasonable state of repair.' That is to say I would regard the judgment in Weeks as being applicable to the terms of s 103 of the Act as it was to s 7 of the repealed legislation. Wilson J thought likewise in Fine v Geier [2003] QSC 73 at para 56.

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…From these slightly differing expressions of the duty imposed by the general law upon a landlord I take that duty to be that a landlord must exercise reasonable care not to let premises containing a defect in features or fittings which is of such a nature that it is likely to cause injury in the ordinary occupation of the premises. The duty extends only to the repair or removal of defects of which the landlord knows or which are obvious on an inspection of the premises. This, at least in the view of Gummow and Hayne JJ, is the extent of the obligation imposed by s 103 of that Act to ensure that premises are reasonably fit for habitation. The duty is thus concerned with the repair or removal of defects which a landlord might reasonably foresee would cause injury during the ordinary course of occupation by the tenant. 106 Jones J said at [46]: The fact that a house may contain features which in some circumstances may be dangerous does not make it unsafe or unfit for habitation as Gleeson CJ pointed out in Jones . The description of a house unfit for habitation, accepted as accurate in Summers , is that of a state of repair such that by ordinary use damage to the occupant may naturally occur . The house was in good repair. The ordinary use of the house did not naturally expose the plaintiff or her children to danger. The ordinary use of the house would involve its occupants walking on dry floors and there is no complaint about the tiles in that condition. Ordinary usage would also involve promptly mopping up any water that accidentally spilt onto the floor. In these circumstances it can only be concluded that the house was fit for the plaintiff to live in. (my emphasis) 107 Although the cases (other than those in the Tribunal) have largely considered the question of fitness for occupation or habitation in tenancy or other contexts, it seems to me that I can derive assistance from them when considering whether there has been any breach by the Builder of the warranty implied by s 18B(e) arising as a result of the alleged defects relating to dampness/moisture under the bathroom tiles and in relation to the air-conditioning of the units. 108 It is relevant to note that the individual owners of the respective units in the Kirribilli Grande have seemingly been able to occupy the premises without apparent injury to their health being posed by or arising from the moisture under the bathroom tiles or the vagaries of the air-conditioning system (unpleasant as the latter no doubt was for them). There seems nothing akin to the ongoing cracking or tilting of a concrete slab or shifting of foundations such as to pose a danger to health. The only item that seems to me to be a defect posing a risk to life and limb is the slipperiness of the pool tiles; and that is conceded. Accordingly, I consider that for the most part the alleged defects (even assuming them to be for matters for which the Builder is responsible) have not been shown to render the premises not reasonably fit for occupation. Reasonably fit for specified purpose 109 Relevant to the question as to the fitness for purpose of the air-conditioning system (as installed in accordance with amendments to the specifications in relation to the particular valves to be used) is how such purpose is to be disclosed in the context of a contract such as this. It was submitted by Mr Elliott that it was not sufficient simply to refer to an item of work (such as the installation of an air-conditioning system) in order to reach a conclusion that there had been specification of a particular purpose in relation to that item. I was taken to what was said in Feast Contractors v Ray Vincent Limited [1974] 1 NZLR 212, albeit in a different context, by Mahon J in the New Zealand Supreme Court as to the circumstances in which disclosure of the required purpose might be said to have been made simply by reference to the item or work being acquired or carried out. There, a distinction was drawn between the case where the parties were equally knowledgeable as to the matter in question (as it might be thought the Builder and Developers would have been when both had expertise in property development and/or were in a position to draw on consultants with expertise in that field) and a case where the parties were not so knowledgeable. Mahon J said (at 215): A disclosure of the buyer's particular purpose is not always sufficient to invoke the statutory condition [there the warranty as to quality or fitness for purpose in the Sale of Goods Act 1908 (NZ)]. The purpose must be made known "so as to show" that the seller's skill or judgment is being relied on. But it has been said in many cases that mere disclosure of the particular purpose will often be sufficient to raise the inference that the buyer is relying on the seller's skill and judgment. …

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It has recently been pointed out, however, that the inference of reliance will not necessarily be drawn from mere disclosure of purpose in a case where the contract of sale is being completed between buyer and seller who are equally knowledgeable in relation to the subject matter of the sale [there referring to Henry Kendall & Sons v William Lillico & Sons Limited [1969] 2 AC 31; [1968] 2 All ER 444]. … It was there said that under such circumstances [where buyer and seller of stock-food were familiar with all aspects of such sales] the mere disclosure of purpose will not of itself be sufficient to establish reliance by the buyer on the skill and judgment of the seller and that, in order to invoke the statutory condition, it must be shown that the purpose was made known under such circumstances as to demonstrate that reliance was being placed on the seller by the buyer. 110 Thus the Builder contends, as I understand it, that it is not sufficient (in order to establish that there was a specification of purpose such as to trigger the warranty as to fitness for purpose) for the Developers (and by extension the Owners Corporation) simply to say that what they required was a particular air-conditioning system. Rather, that in the absence of an express warranty, the Owners Corporation cannot complain if the air-conditioning system specified under the contract (and as varied by the adoption of the Quitstar amendments) turns out to be deficient in its operation. 111 Although Feast was in a different context, by analogy it might well be contended that something more than statement of a requirement for there to be an air-conditioning system installed (even of a particular type) in order to impose on the Builder the burden of a warranty that the air-conditioning system so specified is reasonably fit for purpose. (That said, a similar argument did not find favour in the context of a claim for breach of the warranty in s 18B(b) in The Craftsmen, where the relevant finding there being considered was that even if the cause of certain window leaks was a manufacturing flaw in the product installed, as opposed to poor workmanship in the installation of the windows, the builder was liable for breach of the s 18B(b) warranty. Howie J was of the opinion that (at [97]), whether or not the case was one of defective windows or defective installation, the fact that the windows in question had been installed at the express instruction of the owners' architect did not preclude liability on the part of the builder in that case to the owners. 112 In any event, the question whether the Builder here could avoid liability for breach of s 18B(f) by pointing to the fact that it had built what it was instructed to build (which is one of the submissions raised in relation to the air-conditioning claim), does not take into account the fact that under the mechanical specifications the Builder has expressly acknowledged the purpose for which the air-conditioning as installed was required to be fit. Mitigation 113 Insofar as the Builder has raised a defence based on failure to mitigate loss, this relates solely to the air-conditioning claim and has been particularised in paragraph 17 of its List Response as being that: The Owners Corporation did not refer the performance of the air conditioning system directly to the Developers' architect and/or mechanical engineer (who it is said was responsible for the design of the allegedly defective air-conditioning system); The Owners Corporation failed to make any demand or claim against the architect and/or mechanical engineer (those being entities identified by the Builder, along with the Developers, as concurrent wrongdoers within the meaning of s 35(1)(a) of the Civil Liability Act (NSW) 2002) [I do not understand this particular to have been pressed following the outcome of the claim by the Developers against George Floth]; The inference (from the statement that a complete commissioning should have been undertaken to re-set the operating pressures and safety cut out levels of the system) that on replacement of the two compressors on 23 November 2000 or on replacement of the by-pass valves, that no complete commissioning of the kind there referred to was carried out; and The Owners Corporation failed adequately to maintain the air-conditioning system. 114 As to this, the Owners Corporation says that there is no evidence to support an allegation of failure to maintain the system and that this is not a high hurdle in any event to overcome. The Owners Corporation relies upon what was said by Giles JA in the Court of Appeal in Karacominakis v Big Country Developments Pty Ltd & Anor [2000] NSWCA 313, at [187], namely that: A plaintiff who acts unreasonably in failing to minimise his loss from the defendant's breach of contract will have his damages reduced to the extent to which, had he acted reasonably, his loss would have been less. This is often misleadingly referred to as a duty to mitigate, although the plaintiff is not under a positive duty. The plaintiff does not have to show that he has fulfilled his so-called duty, and the onus is on the defendant to show that he has not and the extent to which he has not ( TCN Channel 9 Pty Ltd v Hayden Enterprises Pty Ltd (1989) 16 NSWLR 130). Since the defendant is a wrongdoer, in determining whether the plaintiff has acted unreasonably a high standard of conduct will not be required, and the plaintiff will not be held to have acted unreasonably simply because the defendant can suggest other and more beneficial conduct if it was reasonable for the plaintiff to do what he did ( Banco de Portugal v Waterlow and Sons Ltd (1932) AC 452; Pilkington v Wood (1953) Ch 770 Sacher Investments Pty Ltd v Forma Stereo Consultants Pty Ltd (1976) 1 NSWLR 5) (my emphasis). 115 For the reasons set out later, I do not accept that the Owners Corporation has acted unreasonably in taking the steps it did to rectify the air-conditioning problem.

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Intentions of Owners Corporation in relation to rectification works 117 It was submitted by Mr Elliott that the court could not conclude that if the Owners Corporation were to recover the sums claimed by way of rectification of the bathrooms (somewhere in the order of $690,000), they would in fact spend those sums in that fashion. It was suggested that it beggared belief that the Owners Corporation would spend money to rip out perfectly good tiles and re-tile the bathrooms, particularly where none of the individual owners (including Dr Hines who gave evidence as to the air-conditioning problems) had deposed to any problems with the respective bathrooms. 118 In Gagner Pty Ltd t/as Indochine Café v Centuri Corp Pty Ltd (2009) 262 ALR 691; (2009) 236 FLR 401; [2009] NSWCA 413, a somewhat different issue fell to be considered, namely what was the position where the party seeking recovery had spent money to rectify the defective work but in doing so had not simply restored the premises to their previous condition but had refitted part of the premises. In considering the assessment of damages in that case, Campbell JA (with whom Macfarlan JA and Sackville AJA concurred) analysed various of the authorities dealing with the manner in which effect was to be given to the compensatory principle in situations where rectification work had not yet been done. In particular, his Honour gave consideration as to the position where there was evidence that the rectification work would not, or might not, be done. 119 His Honour noted that there had been an issue in the authorities (referring to Director of War Service Homes v Harris [1968] Qd R 275 and De Cesare v Deluxe Motors Pty Ltd (1996) 67 SASR 28) as to the relevance of a party's intention in fact to carry out the rectification work or the likelihood that this would be done, and explained the case of Central Coast Leagues Club v Gosford City Council (unreported, NSWSC, Giles CJ Comm D 9 June 2008) as one in which the evidence was that the plaintiff was likely to do nothing to rectify the defects and thus that damages equal to the cost of rectification were not recoverable. In Westpoint Management Ltd v chocolate Factory Apartments Ltd [2007] NSWCA 253, Giles JA had reason again to consider this issue and noted that the relevant question was to ask why it was (if that be the case) that the rectification work would never be carried out. His Honour said (at [60]): But the plaintiff's intention to carry out the rectification work, it seems to me, is not of significance in itself. The plaintiff may intend to carry out rectification work which is not necessary and reasonable, or may intend not to carry out rectification work which is necessary and reasonable. The significance will lie in why the plaintiff intends or does not intend to carry out the rectification work, for the light it sheds on whether the rectification is necessary or reasonable. 120 Campbell JA, in Gagner, noted that Giles J had approached the particular defects in the Westpoint case on the basis that the developer was entitled to rectification damages unless the rectification work was unnecessary and unreasonable. Campbell JA considered that (at [84]), consistently with the reasons in Westpoint, damages could have been awarded for work that was "theoretical" ("in the sense that it had not actually been carried out, and possibly would not be carried out, provided it was reasonable and necessary for such work to be carried out if the contractual object was to be achieved"). His Honour noted that (at [106]): The cost of making good is merely one way of putting a dollar figure on the damage that the plaintiff has suffered, for the purpose of carrying through the compensatory principle. 121 Here, there was nothing to suggest that the Owners Corporation would not be likely to spend moneys awarded for the complete re-tiling of the bathroom (had I been prepared to award the sums claimed in full) on such rectification works. The issue is a moot one since I do not propose to award such damages. However, had I been persuaded to do so, I would not have been satisfied that there was a sufficient basis on which to form the view that the award of such damages was not reasonable and necessary, having regard simply to the suspicion on the part of the Builder that the Owners Corporation would not actually spend the money on the rectification works so ardently pursued in these proceedings. Assessment of expert witnesses 122 Experts were retained by the Owners Corporation and by the Builder to report on the alleged defects. Their respective reports were in evidence. Also before me were joint reports following meetings of the respective experts in conclave: a report in relation to the air conditioning and ventilation system (prepared by Mr Obrart and Mr Field) (report dated 16 February 2010, Exhibit C); a report as to the building issues - bathroom dampness, tiling and Scott Schedule items (prepared by Mr Goddard and Mr Beard) (report dated 17 February 2010, Exhibit A); and a report as to the underfloor heating (prepared by Mr Tsikas and Mr Ford) (report dated 1 March 2010, Exhibit B). Evidence was also given by Mr Youl and Mr Hartwell in relation to the steps taken by their respective firms to address the air-conditioning issues. 123 The Developers, quite properly, have largely relied upon the submissions made in the interests of the Builder's defence to the Owners Corporation's claim. However, in relation to the expert evidence, Mr Loewenstein emphasised the Developers' submission that, with respect to any conflict in the expert evidence given in the interests of the Owners Corporation on the one hand and the Builder on the other, the evidence of the latter should be preferred. Mr Loewenstein drew attention, in particular, to the concession by Mr Youl during cross-examination that he was acting as an advocate for the Owners Corporation, to argue its case (T 93.31-39) (a concession detracting from the independence of and hence the weight to be placed on Mr Youl's observations) and to the manner (which I would describe as dogmatic and assertive) in which Mr Goddard, the building expert retained in the interests of the Owners Corporation, gave his evidence. 124 Two examples were relied upon in relation to Mr Goddard's evidence. First, the (to my mind quite surprising) resistance on Mr Goddard's part to a concession that one might commonly find water in a bathroom area outside the shower. Mr Goddard's evidence was that he would not expect to find water in and around the area immediately outside a shower in a bathroom (at T 134.10-42). He was keen to put forward his reasoning for this (though not on all other issues), that being that he had observed bath mats in the bathrooms he inspected. (I doubt that one could make any assumptions as to the invariable use by unknown occupants of bath mats, or the efficacy of bath mats to ward against the possible profligate dispersal of water in bathrooms, as a general observation but, in any event, Mr Goddard was qualified as a building expert not as an expert in behavioural science or the like and I place no weight on the view he had formed in this regard.) (See T 187. 1-15). 125 What I found most troubling (in assessing Mr Goddard's evidence) was the blanket adoption by Mr Goddard of a rate of $892 per square metre as the cost of any rectification work required to drummy render (irrespective of the particular circumstance and situation of the work being carried out and without, in Mr Loewenstein's submission, clear reference to an identifiable touchstone for that opinion) (see T 184.10 - T 185.13), when compared with the $90 per square metre rate which Mr Beard (with particular expertise in the remedial building industry) proffered as the reasonable rate for such work in his experience. This blanket rate underpinned much of Mr Goddard's costings and, when tested, seemed to be comprised of a number of subjective components (some of which could only charitably be said to be weighted in the Owners Corporation's favour) such as waiting time for lifts and painters waiting for coats of paint to dry. Although Mr Goddard said he had based his rates on the costing guides, time and again he conceded in cross-examination that his rate was considerably (sometimes as much as 5 times) higher. (It was not suggested that Mr Goddard's rate was ever lower than that contained in the costing guide.) 126 Mr Beard, on the other hand, was prepared to adjust the Rawlinsons rate upwards or downwards (T 214; T 216.29), depending on what he considered appropriate and there were instances where he appeared to have adopted conservative assumptions (such as the quantity of tiles for the replacement of tiles in the shower recesses - T 244). 127 Mr Goddard accepted (T 180.8) that he had chosen, when calculating his $892 rate, not to use a composite figure in the costing guides but to split up the work into component parts and apply his own rate. This had the effect, it would seem, of vastly inflating what would otherwise have been the rate in the costings guide and meant that rectification work for often quite small areas was costed at some thousands of dollars. Mr Goddard attributed considerable hours to tasks such as removal of rubbish and justified those in part by the number of units in question. He did not seem to take into account any synergies in project managing the remedial work - he did not see that as his function, which he seems to have seen as costing the work (even when he conceded the work itself was not a defect - such as item 9.4(i)). 128 In light of the concessions ultimately made by Mr Cheney as to the weight to be accorded to Mr Goddard's costings, it is not necessary for me to address in detail the criticisms made of Mr Goddard's evidence. Nevertheless, insofar as his evidence is relied upon by the Owners Corporation for other matters (including the identification of defects in the building works and the extent of rectification work which should be carried out particularly in the bathrooms and to repair drummy render) I should say that I found Mr Goddard's assistance as an expert to be considerably weakened by his arbitrary application of a blanket rate to all items of work and his dogmatic refusal to consider anything other than a blanket approach to the question of costing (see eg T 175.33). The impression I formed was that Mr Goddard was approaching the matter with a view to maximising the Owners Corporation's claims. Mr Goddard's initial report contained no detail of the manner in which he had derived his costing of rectification works (though I note neither had Mr Beard done so at that stage) and, when that information was subsequently provided, it included costs for items such as waiting time for lifts and the like which seemed to have been literally plucked out of the air, without any basis other than Mr Goddard's dogmatic assertion that in his experience this would be the cost of such an item. Mr Goddard's evidence seemed to me redolent of an attempt to inflate the Owners Corporation's claim (or, perhaps, to justify the inflated amount he had earlier placed on the claim). Although in the end, the Owners' Corporation did not press for recovery of moneys assessed by reference to Mr Goddard's costings (other than the somewhat faint submission that I consider certain additions to Mr Beard's costings to reflect additional matters which Mr Goddard had taken into account if I were so minded), my view of Mr Goddard's evidence on the costings aspect adversely affects the weight I can place on other aspects of his evidence such as the method of rectification necessary in the bathrooms and the identification defects in the Scott Schedule items. 129 Mr Beard, on the other hand, I found to be a helpful and balanced witness, making concessions where he found it necessary to do so and explaining cogently the reasoning underlying his conclusions. He is a specialist in rectification procedures for defective works and advises on remedial building methods. He inspected the building on four separate occasions and seems to have been diligent in testing each of the defects listed in Mr Goddard's report. In general, I would place reliance on his evidence, rather than that of Mr Goddard, wherever there is a conflict between the two. (I also note, for what it is worth, that while Mr Goddard, on his own concession, appeared to concede that he had only a little experience in the specialised remedial industry - T 162, my recollection of his answer was that it was given in a sarcastic manner and presumably not intended to be a serious response.) 130 Although criticism was made of Mr Youl's evidence in the witness box, based on his ready acceptance of the proposition that he was appearing as an advocate for the Owners Corporation and to argue its case for them (and I think it might be fairly said that he had made a number of assumptions as to the works generally), unlike Mr Goddard, he did not strike me as being overtly biased in favour of the Owners Corporation. Nevertheless, at the end it did not seem to me that his evidence took matters much further on the critical issues in dispute, when it is accepted that there were problems with the air-conditioning that required rectification. 131 I found Mr Obrart to be thoughtful and considered in his answers and I accept his evidence. Mr Field was not cross-examined, nor was either of the experts in relation to the underfloor heating. Issues 132 With the above in mind, I turn then to the issues for determination:

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(i) Was there a breach by the Builder of any one or more of the s 18B statutory warranties in relation to (a) the waterproofing of the bathrooms; (b) the installation and commissioning of the air-conditioning; and (c) the Scott Schedule items (and, if so, was it causative of loss and what recovery should be ordered)? (a) Bathrooms 133 The main issue identified in relation to the bathrooms (other than the underfloor heating in four units, which I deal with as part of the Scott Schedule items) is that of dampness or excessive moisture (under the floor tiles and above the mortar bed), posing a risk of damage in the future. 134 The Owners Corporation's fundamental complaint (apart from particular issues in relation to units 2C and 7B) seems to be that any measures taken to waterproof the bathrooms (assuming any were in fact taken and irrespective of what they may in fact have been - and there is a paucity of evidence in that regard) were insufficient to provide "risk-free" protection against water migration within the bathroom, that being the loss they have identified as being suffered by breach of the relevant statutory warranties in this regard (those under sub-ss 18B(a), (c), (e) and (f)). 135 From the opening submissions, I had understood the Owners Corporation's complaint in substance to be as to the lack of any waterstops in the bathrooms. A waterstop is defined in 3.8.1 of the Building Code of Australia as a vertical extension of the waterproofing system forming a barrier to prevent the passage of moisture in the floor. "Waterproofing system" is defined in the Code as meaning a combination of elements that are required to achieve a waterproof barrier as required by this Part, including, substrate, membrane, bond breakers, sealants, finishes and the like. The purpose of a waterstop, as I understand it, is therefore to prevent water flowing from the area under the shower floor tiled area to under the bathroom floor tiles (Exhibit E p1455). The explanatory information provided in the Code notes that a waterproofing system for a bathroom floor may include lining it with a material in accordance with Clause 3.8.1.3(a), (b) or (d) or by using a waterproof flexible sheet flooring material in accordance with Clause 3.8.1.3(c). 136 However, the Owners Corporation's position, as explained in Mr Cheney's closing oral submissions, was put in the alternative - namely, that there either were no waterstops or, if there were, none was correctly positioned. Mr Cheney (T 302) was not prepared to say that there was no waterstop anywhere (conceding that this had not been positively proven) but said that the limited destructive testing performed by Mr Goddard (which it is accepted disclosed no waterstops in three of the units), together with evidence of failure in others, led to a conclusion that there was no or no effective waterproofing solution applied in any of the other units. Mr Beard's evidence, on the other hand, confirmed the lack of physical indicators of any general problem with waterproofing in the bathrooms. 137 Mr Elliott took issue with this on the basis that the case the Builder had come to meet, as advanced in Mr Goddard's report and as advanced in the opening, was that the failure on the part of the Builder was to install waterstops - not a failure adequately to waterproof the bathrooms - T 190.32 (hence, it was suggested, the lack of investigation of the use of other alternative methods). Mr Cheney, however, pointed to the particulars in paragraphs 11(g) and (h) as to the lack of waterproofing of the showers (which I have extracted earlier in these reasons). 138 Given the view to which I have come on the Jones v Dunkel submissions (considered below), the dispute as to what was or was not encompassed by the stated particulars in this regard seems to be one I do not need to pursue. I suspect that the focus on the waterstop issue was largely due to the contention by the Owners Corporation that the alleged problems with the waterproofing should be addressed by retro-fitting a waterstop (a proposition with which, from the viewpoint of what would be necessary in the remedial building industry, Mr Beard took issue) and the further contention of the Owners Corporation that since this is a prestigious building for which the respective owners paid large amounts to acquire their title, if a waterstop was required to be retro-fitted to the units, it was not unreasonable for the bathrooms to be completely re-tiled in so doing (something which was perceived to be necessary by Mr Goddard in order to ensure uniformity of tile finishes) or, alternatively, that Mr Goddard's 'compromise' solution (that the whole of the shower floor and wall tiles up to a level of 2.1m be replaced) should be adopted. (During the hearing a more limited mode of rectification was put forward by the Builder's expert and it was conceded that this would be an appropriate alternative if I were not minded to order either the complete re-tiling of the bathrooms or Mr Goddard's alternative solution.) 139 In any event, I accept that the allegations made as to lack of adequate waterproofing were not in the particulars limited to the issue whether there was or was not a waterstop installed in each of the bathrooms and that the reports of both Mr Goddard and Mr Beard seem to have addressed more generally the issue of the adequacy of waterproofing in the bathroom. It does not seem to me to be likely, in view of the stance adopted by the Builder in relation to the calling of evidence of the construction process, that any different position would have been taken had the Builder appreciated that the claim was not limited to a 'no waterstop' claim. 140 That said, there was no evidence (other than Mr Goddard's moisture readings and isolated instances of water damage) adduced by the Owners Corporation to suggest an overall problem with waterproofing in the units and the Owners Corporation's complaint must be seen in the context that there is limited evidence of any actual damage (or ongoing problems) relating to the waterproofing in most of the bathrooms.

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141 There are a number of questions which arise in relation to the bathroom waterproofing claim. 142 First, whether the finding should be made (for which the Owners Corporation contends) that the Builder constructed the shower recesses to all of the bathrooms in the units either without a 'waterstop' being positioned at all or without a waterstop being correctly positioned in accordance with the requirements of the Code and without other adequate waterproofing. 143 Secondly, whether, assuming such a factual finding is made in relation to one or more of the units, whether the absence of a waterstop (or other effective waterproofing) amounts to a breach of any of the statutory warranties. 144 Thirdly, assuming a breach of the statutory warranties by reason of the lack of waterstops (either generally or in the three units where the lack of correctly positioned waterstops was confirmed by what has been referred to as limited 'destructive testing'), whether any loss been occasioned by the lack of a waterstop (or other waterproofing measures). 145 Fourthly, if there has been a breach of the statutory warranties as a consequence of the above, how that should be remedied (in other words, what mode of rectification is reasonable and not disproportionate in light of the test of reasonableness enunciated in Bellgrove v Eldridge [1954] HCA 36; (1954) 90 CLR 613). 146 I consider each question in turn. Does the evidence support a finding as to lack of waterstops/waterproofing generally? 147 It is submitted by Mr Cheney that such a finding should be made. 148 The only way conclusively to determine the presence or absence of waterstops, according to Mr Beard (and I do not understand this to be disputed), is to remove a number of the floor tiles. However, what the evidence does establish (and this is conceded by the Builder) is that there are no visible waterstops in the three bathrooms where limited destructive testing was done (those in units 3A, 6A and 7B). This can be seen from the photographs taken by Mr Goddard (Exhibit E pp1680, 1681) and is not disputed by Mr Beard (Exhibit E p3106 paragraph 12). (I note that the destructive testing in question did not involve the removal of any floor tiles but simply the removal of a piece of aluminium passing under the threshold of the door to the shower (as described in the affidavit sworn in January 2009 by Mr Goddard, p 1678 Exhibit E).) 149 Absent more destructive testing, the Owners Corporation is not in a position to exclude the possibility that there was a waterstop (albeit incorrectly installed) in those three units but it was in a position to ascertain whether a waterstop was visible in the other units. 150 The situation thus seems to be that there are two competing inferences available from the photographic evidence, the former postulating a decision not to install waterstops at all in those three units (or else an unexplained omission to address the question of their installation), the latter that there was poor workmanship in these three particular instances. 151 The question is as to what inferences can or should be drawn (from the fact that when such testing was carried out it was found that there were no visible waterstops in three particular units) as to the presence of waterstops in the other units in the building or as to the waterproofing in the units overall.

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152 Mr Elliott accepts that one can conclude that no waterstops were correctly installed in those locations. (While Mr Elliott also seemed to accept that it might be open to draw an inference from this that waterstops may not have been fitted correctly in the other units, he advocated against the adoption of such a course (T 337.1-5).) 153 Mr Cheney submits that a Jones v Dunkel inference arises from the failure of the Builder to call evidence of what was in fact done in the construction of the bathrooms (other than by reference to a waterproofing certificate issued on completion of the works, which Mr Cheney says is demonstrably false insofar as it asserts compliance with the Australian Standard AS3740 - ie, having certified that wet areas had been waterproofed using approved waterproofing products and methods in accordance with that standard Exhibit E p 1038; a copy of AS3740 being at p 1575 - this conclusion, it was accepted by Mr Cheney, being dependent on a finding that there was no waterproofing). 154 There was no evidence be from the former site manager (Mr Gibbeson) (who seems to have remained working in the Sydney building industry, at least having regard to the publicity photograph from his subsequent employer, tendered as Exhibit F), with whom the former chairman of the Builder, Mr Kell, admitted he had spoken in the past 2 to 3 years (T202.15)). Nor was there evidence from any other person involved in the performance of the actual work (be that Mr Gibbeson's assistant (to whom reference was made in glowing terms by Mr Kell at T 203.47), or from the waterproofing subcontractor). 155 That said, I note that while Mr Kell seems not to have made any immediate (or any particularly extensive) enquiries as to the existence or otherwise during the construction process of waterstops, his evidence in the witness box was that he had at least attempted to contact Mr Gibbeson to ask him about this issue (though it is not clear when) and had not been able to make contact with him (T 207.11). The impression Mr Kell gave was that the supervision of the work of the contractors (perhaps not surprisingly) had largely been left to the site manager in whom he expressed confidence and he seems to have been content not to intervene in that process. 156 Whatever might have been the practice during construction there were no enquiries beyond an attempted contact with Mr Gibbeson on some unspecified occasion and there was no evidence from the Builder as to what had in fact been done nor any evidence as to what records were ordinarily kept by the Builder of work for which it is ultimately responsible, nor as to whether any such records had been lost or were otherwise not available to the Builder. No evidence was given by anyone else from the Builder's organisation to explain its practices in this regard or to suggest that the evidence was no longer available as to what had been done in relation to the waterproofing by the Builder's sub-contractor (for whose work the Builder would ultimately have been liable). 157 Mr Cheney also places weight on the fact that the Builder gave its expert Mr Beard no instructions on this issue (T 218.17). (I note that Mr Beard does not seem to have considered it relevant to his task to make any enquiries as to what was the position in that regard, therefore I do not think that any adverse inference should be drawn from his failure to enquire of the Builder what the position was. As to whether any adverse inference can be drawn from the failure of the Builder to give instructions on this issue, it seems to me that the stronger inference would arise from its failure to call evidence in the proceedings. In considering the instructions to be given to its expert, the Builder or its lawyers may, for example, have considered it appropriate for its expert to determine for himself what waterproofing was evidenced on inspection of the units rather than relying on what others said had been done.) 158 Mr Cheney further submits that before a conclusion could be reached that there was an efficient waterproofing system of some type (given the absence of waterstops in three units) it would be necessary for there to be some evidence from the Builder as to what was done (suggesting in effect that the onus was thus reversed). Mr Cheney referred to what was said in Brewarrina Shire Council v Beckhaus Civil Pty Limited [2005] NSWCA 248, where there had been a failure to carry out the testing required as to compliance with certain contractual requirements for compaction in the construction of culverts in levees built by the defendant, that "the failure to carry out some of the tests does not necessarily mean that the works, when complete, do not comply with the contractual standard. But once it has been established hat there has been a failure to comply with the testing requirements, the evidentiary onus passes to [the builder] to provide - by other evidence - the same degree of assurance as to the integrity of the system as would have been forthcoming had satisfactory test results been obtained in accordance with the frequency of testing under the contract". 159 I read this dicta as referable to a particular situation - where the obligation was as to the performance of tests and the failure to carry out those tests meant that there was a loss of the certainty or assurance which would have been achieved had the tests been carried out, not a more general statement as to the reversal of onus as such in a situation where a Jones v Dunkel inference might be able to be drawn. 160 The Builder's position is that the evidence does not establish that there was a failure to put in place adequate measures for the waterproofing of the bathrooms (though the Builder concedes a need for some rectification works in two of the bathrooms - 2C and 7B). The Builder submits that there is no evidence of any damage to the bathrooms generally which would indicate a problem with the waterproofing and that the moisture readings (unreliable as it is suggested Mr Goddard's photographic evidence of these was) were within an acceptable range. Put simply, the Builder's position is that, whatever waterproofing measures were in fact carried out, they have been (other than in the two particular units identified - unit 2C and 7B) adequate for the purpose, since there has been no evidence of damage in those other units. 161 A Jones v Dunkel inference would be open to be drawn against the Builder in relation to an unexplained failure to call evidence of what was in fact done in the construction of the bathrooms only if the Owners Corporation's evidence is sufficient to give rise to an inference as to a matter which calls for explanation by the Builder. The rule in such a case would permit evidence in relation to that matter to be given greater weight, and an inference or inferences to be more readily drawn, when the party who might have called evidence to the contrary has chosen not to do so. In Commonwealth of Australia v McLean (unreported, NSWCA, 31 December 1996), Handley JA and Beazley JA said; "… The rule typically applies to strengthen or weaken an inference otherwise available on the evidence for the benefit of the party not in default." (my emphasis). 162 However, a Jones v Dunkel inference, if one does arise, would do no more than permit the court to infer that the uncalled evidence or missing material would not have assisted the Builder's case; it would not permit the court to infer that that the uncalled evidence was in fact damaging to the Builder's case. 163 Therefore, the absence of evidence from the Builder cannot be used to make up a deficiency in the Owners Corporation's evidence (such as, for example, the lack of destructive testing on the balance of the bathrooms). What the principle allows is for the more ready acceptance of evidence which might have been contradicted (but which was not). Where an inference is open from facts proved by direct evidence and the question is whether it should be drawn, the circumstance that the Builder disputing it might have proved the contrary, had it chosen to give evidence, is properly to be taken into account as a circumstance in favour of drawing the inference (per Davies AJA in Ho v Powell (2001) 51 NSWLR 572, at [16]; [2001] NSWCA 168, at [76]; HML v R [2008] HCA 16; (2008) 235 CLR 334; (2008) 245 ALR 204, at [302] [303]; Brandi v Mingot (1976) 12 ALR 551, at 559-60; Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298, at 312, 320-321; Katsilis v Broken Hill Pty Co Ltd (1977) 18 ALR 181, at 197; (1977) 52 ALJR 189, at 197). 164 Importantly, for the present case, it is noted that in Jones v Dunkel, Dixon CJ added these observations (at 305); the law which this passage attempts to explain does not authorise a court to choose between guesses, where the possibilities are not unlimited, on the ground that one guess seems more likely than another or the others. The facts proved must form a reasonable basis for a definite conclusion affirmatively drawn of the truth of which the tribunal of fact may reasonably be satisfied. 165 What is there here for the Builder to answer, which would call for it to adduce evidence as to the waterproofing methods employed by its subcontractor and hence enable an adverse inference to be drawn if it does not? In my view, the only specific issue which it might be said the Builder could have been called upon to answer in this regard would be as to the method of waterproofing in fact adopted by its sub-contractor in the bathrooms in which destructive testing was carried out or more generally. The Builder has chosen to proffer no evidence as to this (and no explanation as to why it is not in a position to do so, other than an assertion by its Counsel that this would not be expected some 10 years down the track). 166 The Builder accepts that in the three bathrooms where testing was carried out by Mr Goddard (units 3A, 6A and 7B), the evidence establishes that there was no correctly positioned waterstop. It is said (and I agree) that I cannot infer from this that any waterproofing work was incorrectly performed in other units. (The fact that the subcontractor defectively performed work in a small number of units does not warrant a conclusion that it did so everywhere else.) It is further said for the Builder that, in the absence of evidence to suggest that there were waterproofing problems in the other units, there is no case for the Builder to answer as to the Owners Corporation's contention that there was no waterstop (or no other adequate waterproofing) in those other units (and hence no adverse inference can be drawn from the failure to adduce evidence as to the method of waterproofing used in the construction process). 167 It seems to me that the strongest argument in favour of a finding that there were no waterstops at all installed in any of the units in the building is that it would surely be a remarkable coincidence if the three bathrooms so tested just so happened to be the only three in which no waterstop was installed. However, that inference is only possible in my view if it can be said that the reason that waterstops were not visible in those three units was because none was in fact ever installed (ie because the Builder had made a decision not to install any, say because the Builder had decided to adopt one of the alternative waterproofing measures which Mr Beard said were commonly used in high-end building construction, or because it did not consider the possibility of such installation) rather than because there had simply been poor workmanship in those three units and the waterstops had been incorrectly positioned. That is because, while there would logically seem to be no reason why a particular decision (as to installation of waterstops or not) would not have applied across all bathrooms, I am not persuaded that the fact of defective workmanship in the installation of waterstops in some bathrooms means that I could infer there was similar defective workmanship in all of them. 168 As noted above, what the Owners Corporation relies on (for the conclusion that there were no, or no adequately positioned, waterstops or other adequate waterproofing in any of the units) in this regard is the fact that no waterstop was visible in the three units identified; that Mr Goddard obtained moisture readings which he considered to be excessive in the bathrooms in general; and that there were signs of water damage in units 7B, 2C and 1B (only the first of which being a unit in which the destructive testing was carried out). 169 Taking each of those matters in turn, the first is what inference is available to be drawn from the fact that the tests carried out on three of the bathrooms showed no visible waterstops. Where only one of the two possible explanations for the lack of a visible waterstop in 3A, 6A and 7B would in my view tend towards an inference that there were no waterstops in any of the other bathrooms in the building, I am not satisfied that I should draw the inference for which the Owners Corporation contends (namely to conclude that no waterstops were correctly positioned in the remaining eleven units). 170 As to the significance to be drawn from the moisture readings taken by Mr Goddard (and even leaving aside the fact that his evidence as to how the photographic evidence matched up with his conclusions was hardly compelling, to which I refer below), Mr Beard's evidence (which I accept) was that only in one bathroom were the moisture readings excessive (and that was a bathroom in which destructive testing had not been carried out). Indeed, Mr Beard's evidence was that there was no reason to suspect a waterproofing problem in any of the units other than 2C and 7B (the water staining to the skirting board in 1B being unable to be explained by either side's experts). 171 Relevantly, Mr Beard did not accept that a moisture reading of about 25% in a "wet area", such as a bathroom, would of itself be regarded in the industry as indicative of a water penetration problem and suggested that such areas would be expected to give rise to readings of this order given that they are frequently subjected to water and the tile grouting is porous. Mr Beard's evidence was that the proper assessment of whether there has been moisture ingress in an area must include not simply the taking of moisture meter readings but also an inspection of the premises to ascertain the presence of signs of water ingress - those signs being mould or water staining in tile grout or joints, grout degradation, dampness in adjoining carpet and fixtures, drummy tiles and cracked tiles (para 8 of Mr Beard's 20 May 2010). Mr Beard's own moisture readings did not indicate to him that there was inadequate waterproofing at the shower entry in the absence of any other physical indications to that effect. (Where Mr Beard did see evidence that suggested a problem he made that clear - units 2C and 7B.) 172 As to Mr Goddard's evidence in respect of the moisture readings, the photographs shown of the meter do not show readings of the level he reported (Exhibit E p1502 photo 4). Mr Goddard's evidence as to why this was the case was not particularly persuasive (T 188.27). 173 Mr Elliott submits that the contention that there was excessive dampness was not supported by any evidence of the industry standard or practice in this regard and that Mr Goddard's approach failed to take into account the physical state of the tiled areas in question. Given the caution which I consider should be accorded to Mr Goddard's evidence generally (in light of the view I formed as to his evidence in relation to the costing of rectification works) I place more reliance on Mr Beard's observations of the bathrooms and the fact that he did not observe any physical signs of inadequate waterproofing nor did he find what he regarded as excessive levels of moisture for a bathroom location. I therefore place little weight on Mr Goddard's findings as to moisture readings. 174 As to the third matter, the reference to water damage in units 2C, 7B and 1B, this evidence is inconclusive as to the existence or otherwise of waterstops. Neither expert could explain the water staining in unit 1B but Mr Beard was able to say with certainty that it was not due to a failure of the waterproofing membrane in the bathroom (since if that had been the case it would have been ongoing). There were not excessive moisture levels in that unit. As to the damage in 2C and 7B, it is consistent with defective workmanship but the particular defect to which it is attributable is unclear and it is difficult to draw any more general inference from that damage. 175 Given the lack of corresponding damage in units 3A and 6A to that sustained in 7B, it might be thought that the problem in 7B must have been referable to something other than simply the lack of a correctly-positioned waterstop. It might also be thought that the lack of physical evidence of waterproofing problems or ongoing water migration problems in the units other than 2C and 7B would suggest either that there was a waterstop in those other units or that there was some other waterproofing mechanism in place which was adequate to prevent the problems in other units of the kind which had arisen in 7B (there being no basis on which I could reasonably infer that the occupants of unit 7B were more profligate in their use or dispersal of water through the bathroom than other occupants). 176 The lack of any sign of ongoing water damage in those other bathrooms (except for 2C) would suggest that either there was a correctly positioned waterstop in those units or that some other means of waterproofing had been employed in those units which was effective for the task. 177 Accordingly, the strength of the Owners Corporation's contention that an inference can be drawn (of no waterstops and no other adequate waterproofing in any of the units) seems to rest on no more than what can be inferred from the lack of a visible waterstop in three of the fourteen units. 178 Relevantly, in those circumstances, what a Jones v Dunkel inference does not permit is a choice between two guesses or conjectures or to supply missing gaps in evidence (Cadbury Schweppes Pty Ltd v Darrell Lea Chocolate Shops Pty Ltd (No 4) (2006) 229 ALR 136, at [50]; [2006] FCA 446). 179 In Ho v Powell, Davies AJA said, at [15]: … it is important to have regard to the ability of parties, particularly parties bearing the onus of proof, to lead evidence on a particular matter, and the extent to which they have in fact done so: cf 69 ALJ at 732-733, 736, 740. As stated by Lord Mansfield in Blatch v Archer (1774) 1 Cowp 63 at 65; 98 ER 969 at 970: "… [A]ll evidence is to be weighed according to the proof which it was in the power of one side to have produced, and in the power of the other to have contradicted". See also Azzopardi v The Queen (2000) 75 ALJR 931 at 935 [10]; 179 ALR 349 at 353 [10]. noting that Jones v Dunkel was a particular application of this principle. 180 The burden of proof lies on the Owners Corporation. It has chosen to carry out limited destructive testing in three of fourteen units. There is no apparent reason why that could not have been done in all of the units. The result of the destructive testing is to do no more than establish that in three units there was either no waterstop or it was incorrectly positioned.

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and to what was said in Gregory Paul Montfroy v Roads Corporation (trading as VicRoads) [2005] VSC 320 by Gillard J to the effect that the court is entitled to be bold when a party fails to give evidence on matters in issue of which it clearly has knowledge, though noting that does not entitle the court to speculate and that the court "is only entitled to draw an adverse inference if there is some substratum of fact supporting it". 183 That submission by Mr Cheney faces two difficulties, it seems to me - first, that it seems to have been open to the Owners Corporation to have carried out the limited destructive testing (which seems a bit of a misnomer in that it did not involve the destruction of any tiles at all, as I understand it) on all of the units so as to remove any doubt as to the existence or absence of a visible waterstop in the balance of the units (and hence the Builder is not the only party who could have adduced direct evidence of that fact); and secondly, that the court must (notwithstanding the urging to be bold) be cautious not to use an adverse inference to fill gaps in the evidence or to choose between equally available conjectures (the latter being firmly noted by the Hon Justice Dyson Heydon, writing in Cross on Evidence, 7th Australian ed, Butterworths, 2004, at 41, in a passage which has been endorsed by Heerey J in Cadbury Schweppes Pty Ltd v Darrell Lea Chocolate Shops, at [50] that: … while the rule in Jones v Dunkel permits an inference that the untendered evidence would not have helped the party who failed to tender it, and entitles the trier of fact to take that into account in deciding whether to accept any particular evidence which relates to a matter on which the absent witness could have spoken, and the more readily to draw any inference fairly to be drawn from the other evidence by reason of the opponent being able to prove the contrary had the party chosen to give or call evidence, the rule does not permit an inference that the untendered evidence would in fact have been damaging to the party not tendering it. The rule cannot be employed to fill gaps in the evidence, or to convert conjecture and suspicion into evidence . (my emphasis)) 184 In summary, it seems to be conceded that there are two possible explanations for the lack of a visible waterstop in those particular bathrooms - either none was installed or one was installed but it was positioned incorrectly. In circumstances where there is nothing to point conclusively to which of the two explanations is the correct one, the application of a Jones v Dunkel inference would appear impermissibly to use that rule to choose between two conjectures.

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185 The significance of the two possible explanations for the lack of a visible waterstop in units 3A, 6A and 7B goes principally, in my view, to whether it can be inferred that any waterstop was in fact positioned (whether correctly or incorrectly) in the units other than the three in question where there are no visible waterstops. This is because (as I indicated above) it seems to me to be that if the evidence were to be that no waterstop at all was installed in the three bathrooms where destructive testing was carried out (3A, 6A and 7B) then that might more readily permit an inference to be drawn that there were none in any of the other bathrooms (on the basis that the absence of a waterstop might be inferred to be what I might call a design decision common to all units, as opposed to poor workmanship in some or all of the units). However, if the reason for the lack of a visible waterstop at the top edge of the relevant tiles in the three bathrooms inspected were to be that the waterstops were simply incorrectly positioned (say, because they terminated lower than flush with the tiles), then I consider that it would be more difficult to draw an inference that this was the case in the remaining bathrooms (since the incorrect positioning of the waterstop would be indicative of poor or defective workmanship in those three units but there seems no reason to assume that this would have occurred in every unit). 186 Had the possibility been excluded, by direct evidence or an inference otherwise open on the direct evidence, that the lack of visible waterstops in units 3A, 6A and 7B was due to no more than incorrect positioning (rather than the absence of waterstops altogether), then I would have been inclined to draw a Jones v Dunkel inference (from the fact that the Builder had adduced no evidence as to the methodology employed in the bathroom waterproofing) that no evidence the Builder could have called would have assisted it to avoid the conclusion that there was no waterstop in those three bathrooms, and from that an inference might have more readily been available that nor were there any waterstops in the other bathrooms (on the basis that it is unlikely that a design decision taken in one bathroom would have differed from that taken in other bathrooms of similar character in the same development). 187 However, where the Owners Corporation's evidence as to the absence of a visible waterstop in those three units seems equally be consistent with incorrect positioning of waterstops (and that would not permit a more general inference as to the workmanship in other units), I do not think that the absence of evidence from the Builder enables me to choose between those two possibilities (and accordingly the basis on which I might have been able to draw a Jones v Dunkel inference as to the existence of waterstops in other bathrooms has not been established). 188 Thus, while the evidence supports the conclusion that in units 3A, 6A and 7B there was no correctly positioned waterstop installed, I cannot draw from that the further inference that none was installed elsewhere in the complex. While the lack of evidence from the Builder as to the methodology of waterproofing adopted by its subcontractor throughout the building might have permitted me more readily to draw an inference otherwise available on the evidence, it does not permit me to choose between two equally available inferences. Were that to be the case it would in effect operate to shift the burden of proof, such that all the Owners Corporation would need to do would be to show no visible waterstop in a small number of units to establish a lack in all of the units. I do not accept that this would be the correct result. 189 Even had I been prepared to infer (from the position observed in relation to units 3A, 6A and 7B and the lack of evidence from the Builder in relation to the others) that there were no (or no correctly positioned) waterstops in any of the other units, it would not follow that I could infer, nor would I have inferred, that there was no adequate waterproofing at all in any of the units (other than 2C and 7B where there is physical evidence of damage consistent with defective waterproofing) in circumstances where the Builder has adduced expert evidence which points to a quite different conclusion. Physical damage was sustained only in a limited number of bathrooms (even assuming that the water staining to the skirting board in unit 1B was referable to some such problem - as to which there is no evidence). 190 Similarly, the fact that there were waterproofing problems in units 2C and 7B does not permit me to infer that the underlying cause of those problems (be that the lack of a correctly positioned waterstop or the lack of other adequate waterproofing measures) was mirrored in the other units. The problems in unit 2C and 7B were due (or due solely) to the lack of a correctly positioned waterstop since the problems in those units were not experienced in units 3A and 6A (where there was no visible waterstop and where it is thus not disputed that there is no correctly positioned waterstop). The evidence of Mr Beard which suggests that there is no reason to suspect that there is inadequate waterproofing in any of the bathrooms other than 2C and 7B. 191 Therefore, in answer to the first of the questions which arises in relation to the bathroom claims, while the evidence establishes that no correctly positioned waterstops were installed in units 3A, 6A and 7B of the complex, I cannot conclude that that was the case in the remaining units and I cannot conclude that there is inadequate waterproofing in any of the units other than 2C and 7B (where that has been conceded by the Builder). In my view, the evidence supports no more than a finding that there are no correctly positioned waterstops in three of the bathrooms (3A, 6A and 7B) and that the waterproofing system, whatever it was, employed in two of the units was not satisfactory (2C and 7B). It does not permit an inference that there were no waterstops (or no correctly positioned waterstops) installed in the rest of the bathrooms throughout the complex; nor does it permit an inference that there was no other (or no adequate) waterproofing in units other than units 2C and 7B. Does absence of correctly positioned waterstop/waterproofing amount to a breach of warranty? 192 As noted above, I am satisfied (and it is in fact broadly conceded) that there were no correctly positioned waterstops in the bathrooms in units 3A, 6A and 7B. I am not satisfied that there was a failure to install waterstops in the other units nor that there was a failure adequately to waterproof the shower area in the units in general (other than as conceded in units 2C and 7B). 193 The question which follows (which would also have arisen had I drawn the more general inference that there was no waterstop anywhere in the complex) is whether the absence of a properly positioned waterstop in units 3A, 6A and 7B constitutes a breach of the statutory warranties. 194 Mr Cheney submits that I should find that the failure to position a waterstop in the bathrooms amounts to a breach of the statutory warranties provided by s 18B(a), (c), (e) and (f) of the Act). 195 As to s18B(a) (the warranty that work be performed in a proper and workmanlike manner), Mr Cheney notes that Mr Beard agreed that the inclusion of a waterstop was something that accorded with good building practice both as at the time and as at today (it being something he would "definitely" recommend to any client installing a new bathroom today - T226.30). 196 I was not taken to anything in the building contract which specified that waterstops be installed in the bathrooms. However, if the Code mandates the installation of a waterstop, then the failure to install a waterstop or to install it correctly would seem to me necessarily to carry with it a conclusion that there has been a failure to carry out the required waterproofing work in a proper and workmanlike manner. 197 I consider below the applicability of the Code in this regard. Suffice it to say that I consider that the Code required the installation of waterstops (notwithstanding that it recognised the possibility of utilising other waterproofing methods). Therefore, I find a breach of this warranty in relation to units 3A, 6A and 7B. 198 Had I not considered that the Code was applicable, then in the absence of evidence that the Builder's sub-contractors had sought to install waterstops but had done so incorrectly, I would not have found a breach of this warranty. 199 As to the complaint made of a breach in the context of waterproofing generally, other than in relation to units 2C and 7B I am not satisfied that there was a breach of the warranty in s 18B(a). 200 As to s18B(c) (the warranty that the work will be done in accordance with, and will comply with, the Act or any other law), it is submitted by Mr Cheney that the failure to install a waterstop is a breach of clause 3.8.1.19 of the Code. Again, reference was made to Mr Beard's acknowledgement that the inclusion of waterstop was prescribed by the Code "at the time and indeed currently now" (T226.16). 201 The relevant provision of the Code on which the Owners Corporation relies provides as follows: 3.8.1.19 Enclosed showers without hobs or set-downs At the extremity of the shower area, a waterstop must be positioned so that its vertical leg finishes - (a) Where a shower screen is to be installed, not less than 5 mm above the finished floor level (see Figure 3.8.1.11); and (b) Where the waterstop intersects with a wall or is joined, the junction must be waterproof. [3.8.1.19 insrt BCA 2005.] (my emphasis) 202 This provision is within a part of the Code headed "Applicable Construction Manual" which commences as follows: A. Acceptable construction manual 3.8.1.0 Performance Requirement P2.4.1 is satisfied for wet areas in Class 1 and 10 buildings if they are waterproof or water resistant in accordance with AS 3740 - Waterproofing of wet areas within residential buildings. 3.8.1.1 Application Compliance with this acceptable construction practice satisfies Performance Requirement P2.4.1 for wet areas provided the wet area - (a) is protected in accordance with the appropriate requirements of 3.8.1.2 to 3.8.1.27; and (b) complies with the appropriate details described in Figures 3.8.1.1 to 3.8.1.16. [3.8.1.1 am BCA 2008.] 3.8.1.2 Wet areas Wet areas within a building must be waterproof or water resistant in accordance with Table 3.8.1.1. [3.8.1.2 insrt BCA 2005.] (my emphasis) 203 Table 3.8.1.1 sets out the waterproofing and water resistance requirements for building elements in wet areas, including for an enclosed shower without hob that for the floors and horizontal surfaces "Waterproof entire enclosed shower area including waterstop" (which thus contemplates that there will be a waterstop installed) and that the walls be "Waterproof to not less than 150 mm above the shower floor substrate with the remainder being water resistant to a height of not less than 1800 mm above the finished floor level". 204 Mr Beard gave evidence that there are various methods utilised by builders (including the use of a waterproofing additive within the tile bedding and an envelope system of membrane) that achieve the prevention of moisture ingress to the 'outer' section of the wet area and that those were often used in lieu of a waterstop (and frequently used in high end construction to stop any possibility of degradation to the entire wet area, including the shower recess) (paras 14/15 affidavit of 20 May 2010). However, he did not suggest that the Code provision was not (as it seems on my reading to be) expressed in mandatory terms. 205 The existence of alternative methods of waterproofing (or alternative methods that might perhaps be used in conjunction with a waterstop), however widely they may be used in the industry, does not alter the fact that the Code appears to mandate the use of waterstops for the purposes of achieving compliance with the relevant performance requirement, not simply as an available option. 206 Under regulation 136A of the Environmental Planning and Assessment Regulation 2000 (NSW), 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. There were similar provisions in relation to the issue of development and/or construction certificates over the period from 1998 onwards. From a general review of the regulations at the time, it seems that under either the Local Government (Approvals) Regulation 1993 (NSW), or the Environmental Planning and Assessment Regulation 1994 (NSW) or Environmental Planning and Assessment Regulation 1998 (NSW), compliance with the Code was required and it did not seem to me to be disputed that the Code provisions had the force of law, the only question being whether the Code itself required such work to be undertaken. 207 As I read the provisions of the Code, installation of a waterstop was required. Mr Beard in cross-examination readily confirmed that if there were no waterstop installed there would be non-compliance with the Australian Standard (T 226.16; T 232), which then and now called for the installation of a waterstop, and that it was recognised as very good practice in the building industry to install one (T 230.27). (What Mr Beard's evidence as to alternative building practices went to, it seems to me, was whether it would be reasonable to require retro-fitting of waterstops if there had been none installed in the first place. His evidence was that there were in reality other methods often used to overcome that (T 226.7-.18) and his evidence was that if there were no waterstop then as a matter of practice it would first be necessary to see if there was any need to do anything about it (say, because the area had been otherwise adequately waterproofed) - T 225.) 208 Accordingly, it seems clear that the failure to install a waterstop would of itself amount to a breach of the warranty in s 18B(c) and, it being required under the Code/Australian Standard, the failure to install one properly would be a breach of the warranty in s 18B(a). 209 The evidence establishes that there is no correctly positioned waterstop in units 3A, 6A and 7B. I therefore find that there has been a breach of the statutory warranty in s 18B(c) in respect of these three units. As I am not satisfied that the Owners Corporation has established on the balance of probabilities that there is no correctly positioned waterstop in the remaining bathrooms in the complex (nor that there was no adequate waterproofing in those other units), there is no breach of this warranty in relation to those units. 210 As to s18B(e) (the warranty that ... the work will result, to the extent of the work conducted, in a dwelling that is reasonably fit for occupation as a dwelling), the absence of the waterstop is said to render the habitable space outside the shower recess 'vulnerable to water that is not intended to be there, and with which it is not designed to cope'. 211 It is submitted by Mr Cheney that the description 'reasonably fit' means that the unit's fitness for occupation as a dwelling need not be so compromised that it becomes unliveable before there could be said to be a breach of the warranty. I agree, but for the reasons set out earlier, I consider that something more than discomfort or the possibility that there might be water migration under the tiles is needed for the premises not to be reasonably fit for occupation. 212 I am not satisfied that a lack of waterstops in 3A, 6A or even 7B (where there were evident water problems) renders those units not reasonably fit for occupation (let alone approaching the level of rendering them uninhabitable). In this regard, the observation of Mr Beard was that there was not excessive dampness to the floor tiles in the majority of the units he inspected (that being part of the basis on which he said there was no evidence to raise a suspicion that there was any defect in the work carried out in those bathrooms). His observations in relation to each unit are set out in his report (the page references to which, helpfully supplied by Mr Elliott being (Exhibit E 3/929 (1A); 3/932 (IB); 3/934 (1C); 3/937 (2A); 3/938 (2B); 3/941 (3A); 3/943 (3B); 3/945 (5A); 3/946 (5B); 3/948 (6A); 3/949 (6B); 3/950 (7A); and in his affidavit of 20 May 2010.) 213 In particular, Mr Beard noted that (other than in unit 2C where, though there was no evidence of failure to the floor tiles in the master bedroom ensuite, the moisture readings were 35% at the time of testing, and unit 7B, where there was evidence of failure to floor tiles in the master bedroom ensuite shower) in the other bathroom wet areas in the building there were no visual defects within the tiles; there was no excessive mould; there was no overflow water or build up of water at the bathroom threshold; there were no drummy or cracked tiles; and the moisture readings were in an acceptable range (up to 25%) (see para 10 of his affidavit of 20 May 2010). 214 Mr Beard also observed that the above factors had no adverse effect on the habitability of the units. (I do not place weight on this observation as it seems to me that that is the very finding I have to make.) Nevertheless, the fact that there is no suggestion that the units have not been occupied in the normal course over the period of ten years since practical completion suggests to me that even in those units where destructive testing revealed no visible waterstop the units remained reasonably fit for occupation. 215 I am not satisfied that there has been a breach of the warranty of reasonable fitness for occupation in relation to the bathroom waterproofing. 216 As to s 18B(f) (the warranty that the work and any materials used in doing the work will be reasonably fit for the specified purpose or result), similarly Mr Cheney emphasises the qualification as to reasonableness. He submits that the warranty focuses upon the particular purpose for which the waterproofing work is required, namely to confine shower water to the shower recess. 217 Mr Cheney points out that a number of practical problems (both potential and actual) were identified by Mr Goddard as being caused by the lack of a waterstop, those being that: a) water now lies between the membrane and the mortar bed below the tiles outside the shower recess (Exhibit E p1681); b) moisture readings taken by the experts indicate that there is excessive moisture below the tile surfaces in the bathrooms (reference being made to the various meter readings taken by Mr Goddard measuring '25 plus' , that being said to be the limit of the scale). (Mr Beard's moisture readings in 2C were in excess of this - 35% at the time of testing by him - and described a reading of "well in excess of 25%" as indicative of a water penetration problem", though noting that a reading of about 25% would not, in the absence of factors such as mould, water staining, drummy tiles, cracked tiles or overflow into the outer wet tile bed and bathroom threshold - para 8, his affidavit of 20 May 2010); c) the presence of water damage to the skirting boards of unit 1B and to carpet outside the master bedroom ensuite in unit 7B (Exhibit E p1684); d) the threat to the integrity of the subfloor heating in the bathroom floors posed by water that is allowed to migrate from the shower recess into the bathroom floor beyond (Exhibit E p1685). (Mr Cheney notes that Mr Tsikas also identified this threat - Exhibit E p2996 - Mr Tsikas' report in that regard noted that the cold tail connection should be waterproof and that moisture ingress would be likely to cause a failure in the manner in which he said that the underfloor heating had failed in the affected bathrooms). 218 The result of the failure to install a waterstop is said to be that there is a risk of 'the migration of water into areas that are not intended to combat water'. Mr Goddard's evidence was that any moisture would be sitting in the mortar tile bed immediately above the waterproof membrane but below the tile level. 219 The Builder contends that the allegation that there is excessive dampness under floor tiles immediately adjacent to the shower door in every bathroom in every unit, and that this was caused by defective works, should be dismissed. 220 Mr Elliott submits that the evidence establishes that the moisture meter readings relied upon by Mr Goddard were not outside of an acceptable range and says that there is no evidence of any damage of the kind that would be expected in the event the showers had been inadequately waterproofed, other than unit 2C. I accept that is the case. (Thus it is submitted by Mr Elliott that, whatever the system of waterproofing which was in fact employed in each bathroom, it has done its job effectively.) 221 The water meter readings further away from the shower do not show excessive moisture. I think there is considerable force in Mr Elliott's submission that if there had been inadequate waterproofing (such that water had spread above the waterproof membrane) then because the tile bed is porous one would have expected that over an eight year period the water would have spread throughout the bathroom. Mr Elliott submits that the fact that the moisture readings indicate that it has not so spread (and the other indicators of water moisture identified by Mr Beard are not evidenced in the bathrooms) is strong evidence that the waterproofing is effective and that the moisture that is under the tiles immediately adjacent to the shower is there as a function of normal usage of the bathroom. 222 Thus it is submitted that there is no breach of the warranty as to fitness for purpose and that the court should conclude that the bathrooms were built in a way which prevents excessive dampness under the tiles next to the shower door. I agree. 223 As to unit 1B, Mr Beard noted that there was some evidence of water damage on a wall near a shower. Neither he nor Mr Goddard was able to determine what had caused that occurrence of water on the wall (T 170.38) (and it seems to have been referable to an isolated incident since when Mr Beard inspected the premises the wall was no longer wet. Mr Beard concluded that this demonstrated that the wetness was not caused by a fault in the membrane (para 32 of his 27 May 2010 affidavit; T 241.38-.42). In the absence of evidence that this was caused by lack of a waterstop or any defect it in the waterproofing of the shower in that unit, it is submitted by Mr Elliott that it could be due to any number of reasons which have nothing to do with the waterproofing of the floor. Significantly, Mr Beard's opinion was that if a failure of the membrane in the shower had been the cause of the problem, then it would have been far more widespread, would have been evidenced by damage to the tiles and grout on the floor, and would have been ongoing. I considered Mr Beard's evidence (and consider this submission) to be both logical and persuasive. I find no breach of warranty in relation to unit 1B. Rectification of the works 224 For the reasons set out above, I have found that in relation to the bathroom waterproofing there was not a breach of any of the statutory warranties other than in respect of units 2C, 3A, 6A and 7B. In relation to those units the question is as to how rectification of the defects should be effected. (Had I been of the view that there was a breach of statutory warranty in relation to the remaining units then a similar question would have arisen with them and the analysis which follows would have been applicable equally to those other units.) 225 I note that it is the submission of the Builder that even if there had been breach of statutory warranty in relation to all of the bathrooms (by reason of the failure to install a waterstop) then there is no need for rectification (other than in units 2C and 7B) because no damage has been shown to have been sustained thereby. 226 It is submitted by Mr Elliott that, at its highest, the Owners Corporation's case is that there is some moisture sitting in a very small part of the tile bed immediately adjacent to the shower, which has not caused and apparently cannot cause damage to the tiles. (That was not accepted by Mr Goddard but in the witness box there seemed little that he was prepared to entertain if not in his report and I did not find him to be as helpful an expert witness as was Mr Beard.) Mr Elliott submits that the presence of such moisture is entirely consistent with what one would expect underneath a section of tiles regularly exposed to water which are held together with porous grout and that it does not warrant work to be carried out on the shower. 227 Mr Cheney, however, places weight on the fact that Mr Beard's own report conceded that, in relation to bathroom 7B where a waterstop had not been installed, 'rectification' would require the installation of a waterstop under the shower screen (Exhibit E p 953). Mr Cheney notes that, when asked about this aspect of his report, Mr Beard advanced no reason why the particular unit to which he there referred should be put in any different category, or given any different treatment, to the balance of the units in the complex. I accept that this was the one area in which Mr Beard seemed perplexed when explaining his position (but to my observation it seemed to me that when Mr Beard was taken to this passage in his report he did not have a clear recollection of the context in which he had made that statement and was therefore somewhat at a loss - rather than seeming to be intentionally seeking to resile from any earlier statement that he had made). As Mr Cheney notes, when taken to this issue Mr Beard first suggested that the sentence was an "error" (T224.14), then asked for some time to reconsider (T224.20), then conceded he had no explanation (T224.23). When questioned further about the passage (T229), he could proffer no explanation but adhered to the position that the shower recesses in the other units should be treated differently. (One apparent reason why those units might be dealt with differently is perhaps if there was no evidence of damage having been caused by the lack of a waterstop.) 228 Mr Cheney places weight on what was said in Building Insurers' Guarantee Corporation v Strata Plan No 57504 [2010] NSWCA 23, in contending that the Owners Corporation are entitled to damages reflecting the reasonable cost of retro-fitting a water-stop to each of the bathrooms in the complex. In that case, Handley AJA (with whom Campbell JA and Tobias JA agreed) said (at [83]-[84]): In my judgment the findings of the referee and the Judge on this issue were correct. There was a breach of contract affecting the waterproofing defences of the building, inferior hobs was installed, there was uncertainty about their effectiveness and a risk that they would fail. Demolition and reinstatement was the only way, on the evidence, that the risk of water penetration could be eliminated. It was reasonable for the Owners Corporation's corporation to undertake that work, and damages could properly be awarded on that basis.

[53]

As Campbell JA said during argument, proof of loss, given causation, involves a comparison between the plaintiff's situation as it should have been and his situation as it is. The Owners Corporation's corporation did not have what it was entitled to have, a waterproofing system that was risk free, and that was proof of loss. (my emphasis) 229 Mr Cheney submits that, here, if there was a breach of the warranties affecting the waterproofing defences of the shower recesses by reason that an inferior construction detail without waterstop was adopted (being one that Mr Beard agreed he would not recommend in new construction), then there is uncertainty about the effectiveness of the as-built installation and a risk that the waterproofing will fail. He submits that the Owners Corporation are in the position that the only means of eliminating the risk of water penetration (and hence to deliver to the Owners Corporation a risk free waterproofing system) is to retrofit the waterstop. 230 In anticipation of Mr Elliott's submission in this regard, Mr Cheney noted that in Building Insurers' Guarantee, the insurer had relied on the fact that there had been no water penetration in over ten years to argue that there was no evidence that the hobs would fail within the design life of the building and hence no need for any rectification (see [37] and [51]) but that in the Court of Appeal the only question was posed as being (at [59]) whether it would be reasonable for the Owners corporation to replace the timber hobs before they had failed, when there was no finding that failure will probably occur during the design life of the building. (There, however, I note that the case was one where the contract called for the installation of cement hobs (and what had been installed were timber ones). Here, as I understand it, the contract does not specify the means by which waterproofing is to be carried out but the Code would mandate that there be waterstops installed as part of acceptable construction practice.) 231 The Court of Appeal (at [74]) noted that the trial judge found that the intention of the hobs was to form part of an effective waterproofing system for the life of the building, but that the "hobs did not necessarily do this", stating that the question, as posed by the trial judge, was as to who (as between the developer and builder) should bear the risk that the hobs would prove inadequate for their intended part in the waterproofing system and that the question could be no different as between the Owners Corporation and the Guarantee Corporation. Mr Cheney points out that notwithstanding that only one of the 111 units in the complex had suffered moisture staining and damage, the Court of Appeal upheld the conclusion that that demolition and reinstatement was a reasonable course to adopt (at [82]). 232 Mr Cheney submits that it is significant that, although Mr Beard contends that remedial works are not necessary, he does not assert that the existing installation is 'risk free' or as free from risk as would be achieved by construction in conformity with the Code. (Mr Beard, however, did express absolute certainty that his solution of replacement of the shower recess tiles could be done without damage to the floor membrane and without the need to remove a layer of wall tiles - T 238.1 - having explained in some detail from T 235/6 the process which would be required in that regard.) 233 Mr Cheney notes that not only did the Court of Appeal accept that the prima facie remedy for breach of statutory warranty is the cost of achieving compliance, there was also a suggestion (at [80]) that the defendant in cases such as this might have the legal onus of proving functional equivalence, so that reinstatement would be unreasonable, although the Court of Appeal did not there reach a concluded view as to that possibility. Mr Cheney submits that, having regard to the beneficial and protective nature of the relevant provisions of the Act, the appropriate remedy is to put the Owners Corporation in the position in which it would have been had there been conformity to the statutory warranties. 234 In respect of the failure to install a correctly positioned waterstop which I have found to be a breach of statutory warranty in units 3A, 6A and 7B, then the appropriate means of rectification in my view is to retro-fit a waterstop (even if in the interim there had been no damage to particular units), because of the potential for damage in the future and the fact that the Owners Corporation was entitled to expect a bathroom compliant with the Code. (I also place weight on the fact that Mr Beard considered that this would be the appropriate manner for remediation of unit 7B.) Similarly in relation to unit 2C, in light of the moisture readings obtained on inspection by Mr Beard, I consider it appropriate for a waterstop to be retro-fitted. Having regard to my findings above, this issue does not arise for any of the units other than 2C, 3A, 6A and 7B. Means of rectification 235 As to the means of rectification, the dispute between the parties was as to whether a complete re-tiling of the bathroom was necessary or whether that was unreasonable and something less than that would suffice. The difference here is as to the Owners Corporation's insistence that there be identical tiles (or as identical tiles as may be able to be obtained through the use of tiles from the same batch). That was so notwithstanding that it seemed to be accepted that marble is a natural stone and, as I understand it, that variations could be expected across marble tiles even where they come from the same batch. 236 Much weight was placed on the fact that Mr Beard was readily able to discern the presence of replacement tiles in unit 7B (T 223-224) (although when I was taken to the particular photograph, from which a difference in colouration of the tiles was certainly apparent, it was nevertheless not immediately apparent to me precisely which were the (four) replacement tiles to which Mr Beard had referred - there being a greater section of darker coloured tiles and only a few lighter ones, nor was there any evidence as to what steps had been taken in order to attempt to match the existing tiles, with their then wear and tear, when obtaining replacement tiles). 237 That said, Mr Kell was confident, from his experience in the building industry, that most products could be matched (noting that with natural stone there was always some variation) - T 208.11. Even accepting that, as a part owner of the Builder, he had some interest in professing that opinion, it struck me as a genuine expression of his belief and was supported by the expert opinion of Mr Beard, who was confident, as a remedial building expert, that a much closer match could be expected to be achieved than he had observed in the one unit in which replacement tiles had been fitted by the particular owner of the unit (7B), (though there is no way of knowing what amount of effort went into choosing the replacement tiles in 7B and Mr Beard conceded that it would not have the same uniformity of finish as a tile struck from the same batch of stone - T 232.28). 238 Mr Goddard, apparently on the basis of instructions from the Owners Corporation that identical replacement tiles could not be obtained, thus initially advocated the complete gutting and re-tiling of the bathrooms. In the witness box Mr Goddard accepted that such a solution was inconsistent with the practice typically adopted by builders in the remedial building industry and was also inconsistent with the published Guide (T 145.24ff), a fact of which he said he was "acutely aware" (T 145.36). Shortly before the trial, Mr Goddard put forward a 'compromise solution' of re-tiling up to a height of 2.1m on the walls (the suggestion being that this was due to a realisation that this was an untenable position and he would be cross-examined on it, a suggestion Mr Goddard did not accept). 239 I note that, other than assertions as to the unavailability of matching or identical replacement tiles, there was no evidence leading up to the hearing as to the likelihood that such tiles could be procured (and Mr Beard's evidence in the witness box suggested that, contrary to the assumptions on which Mr Goddard had made his recommendations, it would be possible to obtain a sufficiently close match to meet the guidelines for tolerances used in the remedial building industry). 240 An application was made during the course of the hearing for leave to file an affidavit from someone in the tiling industry in relation to this issue. Objection was taken to that course by Mr Elliott and, for the reasons I outlined orally at the time, I rejected that application. (Amongst other things, I noted that the evidence which had already been given was to the effect that absolute identicality could not be assured even with tiles from the same batch (marble being a naturally occurring stone).) Further, the Owners Corporation had been on notice at least since the first report of Mr Beard that he was asserting that sufficiently matching tiles might be available (though he had not expressly disputed, and did not in the witness box dispute, the proposition that absolutely identical tiles would not necessarily be available). It did not seem to me that I needed an expert to confirm that evidence and, given the lateness of the application and the fact that to accede to that application would have led to an application for an adjournment for instructions to be obtained and potentially for further evidence to be adduced from overseas suppliers in reply to the evidence now sought to be tendered (and having regard to the principles enunciated in Aon Risk Services Australia Limited v Australian National University [2009] HCA 27; (2009) 239 CLR 175), I rejected that application. 241 The question is whether a complete re-tiling is unreasonable in the circumstances. 242 Mr Cheney notes that in Tabcorp Holdings v Bowen Investments Pty Limited [2009] HCA 8, the High Court considered that the example which had been given in Bellgrove of unreasonableness tended to indicate that the test of 'unreasonableness' was to be satisfied only by "fairly exceptional circumstances", the High Court in that context referring to what Oliver J had said in Radford v De Froberville [1977] 1 WLR 126, at 127 that the diminution in value measure of damages would only apply where the innocent party is 'merely using a technical breach to secure an uncovenanted profit' . 243 Mr Goddard accepted that in terms of the different tiling solutions put forward the question as to which should be accepted was one falling largely in the area of "interior design" (T 152.26) from which it seems to me he accepted that the compromise solution he had put forward was not one necessary to achieve rectification of any problem caused by the lack of a correctly positioned waterstop but simply the manner of achieving an aesthetically acceptable finish for the individual owners. 244 The prestigious nature of the units, and their setting on what was said to be one of the most desired pieces of real estate in the world, was emphasised by Mr Cheney. The (non penthouse) units were purchased for between approximately $3.1 m and $4.5 m (Exhibit G). That fact is said to be relevant to the question whether the Builder has shown that "fairly exceptional circumstances" exist that would clothe the claim for replacement of all of the bathroom tiles with the 'unreasonableness' referred to in Tabcorp Holdings. I am not satisfied that this is the case. (In this regard, Mr Cheney suggested that in the exercise of my discretion I should have regard to the manner in which the Builder had conducted its defence of the case - only conceding very recently, for example, the lack of visible waterstops in certain of the units. I consider that this is something, if at all, to take into account when considering the question of costs. There was, I note, equal criticism on the Builder's part of the manner in which the Owners Corporation had conducted the litigation and it seems to me that the opposing contentions are not relevant to the reasonableness of any particular mode of rectification.) 245 Mr Beard referred to the Guide to Standards and Tolerances 2007 edition (Exhibit E pp926 and 980) and was of the opinion that in the remedial building industry 'a practical approach' should be adopted. That approach contemplates that where non-matching tiles have to be used, a joint location (such as the aluminium channel of a shower screen, a separating doorway, an intersecting wall, a change in wall direction or similar, to provide an 'architectural break') should be selected to separate the different tiles. Mr Cheney points out that the Guide also notes that "the use of a slightly different tile is not a defect if it used with the written agreement of the owner' (Exhibit E p1026) and suggested that Mr Beard's approach had ignored that part of the Guide. 246 It seemed to me, rather, that what Mr Beard was pointing to was that in the remedial building industry there was understood to be a reasonable alternative to replacement of the whole of a tiled area, dependent upon whether sufficiently matching tiles were available, and that was by utilising an architectural break in order to minimise the disparity between non-matching tiles. He did not suggest that the owner's wishes in that regard would be ignored. However, tested against the principle of reasonableness, the import of the practical approach advocated in the Guide seems to me to suggest that it would be unreasonable for an owner to insist on replacement of a large quantity of undamaged tiles at great cost if a close match could be found and installed in a place where the joinder of the tiles would not be immediately obvious. I do not think Mr Beard's evidence goes beyond this. 247 Mr Cheney nevertheless advocates the approach that primacy should be given to the client's wishes, noting Mr Beard's acknowledgement that the owners' involvement is "very important because ultimately they are the people that have to live with this" - T 230.44. Mr Cheney confirmed that the Owners Corporation's position is that the owners should have what they paid for, namely a bathroom with a uniform finish, or 'as uniform a finish as tiles sourced from the one batch can achieve'. As soon as the latter qualification is stated, it becomes apparent in my view that the question can only be one as to how close a match is achieved (since even if the whole bathroom is re-tiled there will still inevitably be a degree of variation in naturally occurring stone such as marble). 248 The alternative solution put forward (if the court were to hold that replacement of all tiles in the bathrooms was unreasonable) was the 'compromise' solution identified in Mr Goddard's affidavit of 22 May 2010 (Exhibit E p3113), the cost of which was assessed by Mr Goddard at $242,856 inclusive of GST (Exhibit E p3119), or, failing that, the removal of all shower recess floor tiles (as set out in paragraph 19 of Mr Beard's affidavit of 20 May 2010). 249 Mr Elliott submits (not controversially, it seems to me) that in order to recover damages the Owners Corporation must show that the work is both necessary to produce conformity with the contract and that expenditure of money on the proposed rectification is reasonable, relying on what was said by Hammerschlag J in Janet Campbell v CJ Cordony & Sons Ply Ltd [2009] NSWSC 63, at [155]. Mr Elliott submitted that in circumstances where, after eight years, almost every bathroom has a set of undamaged tiles in the relevant area, even if there had been some technical breach (which was denied) it would not be reasonable to expend money on rectification of the alleged defective works (and certainly not to re-tile the whole of the bathrooms in order to do so). It seems to me that the proposal for complete re-tiling of bathrooms in which there has been no physical evidence of waterproofing problems (and no indication of excessive moisture levels) based on no more than an inference drawn from lack of a visible waterstop in three bathrooms, is a prime example of the kind of unreasonableness postulated in Bellgrove. If replacing first quality bricks with second-hand bricks to produce building conformity with a building contract is unreasonable, so too must be replacing undamaged marble tiles (of a considerable quantity) where any repair would only necessitate the removal of a small number of tiles and where there is no reason to believe that a very close match could not be achieved with appropriate effort on the part of the remedial builder. 250 Mr Elliott further submits that no damages would be recoverable even if there had been a breach of statutory warranty because, whatever system of waterproofing has been used (keeping in mind Mr Beard's evidence that a variety of methods are used), it is a system that has been effective and done its job. However, where there is evidence that there is no visible waterstop, then I think it reasonable for that to be rectified (particularly when Mr Beard's evidence is that it can be done so at relatively low cost). 251 The claim for a complete re-tiling of the walls and floors in all of the bathrooms represents more than $650,000 of the Owners Corporation's overall claim in these proceedings. Mr Cheney, says that must be viewed in the context of the overall development and that the sum of approximately $28,000 per bathroom represents less that 1% of the average purchase price for the units (T 29). Mr Elliott, for his part, submits that it beggars belief that the Owners Corporation of these units, upon receipt of a sum of over $650,000, would spend that sum on ripping up completely undamaged bathroom tiles and replacing them with new ones. (Mr Elliott points out that not a single owner (including Dr Hines who gave evidence as to the air conditioning costs) had given evidence that any money received would be used to carry out any works to bathroom tiles or that the alleged defect was a problem for them.) That may or may not be the case but it does not seem to me that that is the real issue here. The question is whether expenditure of the money on the proposed rectification would meet the test of reasonableness (or, to adopt the language in Bellgrove and the cases which have considered it, would be necessary to produce conformity with the contract and not unreasonable). There is no evidence to suggest that the Owners Corporation does not intend to carry out the rectification works if put in a position to do so, or that the works would be impossible or otiose for some reason. The question is simply as to the reasonableness of what is proposed. 252 In this regard, Mr Cheney submitted that a different test of reasonableness should be applied where the case is one of breach of statutory warranty from that applied in a building case where the claim rests in breach of contract (on the basis that the legislation evinces an intention to protect persons in the position of the Owners Corporation and places responsibility on the Builder in that regard). Mr Cheney fairly acknowledged that he had no authority for such a proposition. Mr Elliott's response was that there was no reason for any such differentiation in approach since what the legislation does is to import the particular warranties into the contract (where they then have the same work to do - and consequences upon breach - as any contractual warranty). I agree. The only difference it seems to me is as to the applicable limitation period within which claims for breach of warranty can be brought and that is expressly dealt with in the legislation. 253 In this regard I note that Mr Cheney submits that when considering the question as to what is a reasonable remedy in respect of defective tiling, the Builder's conduct in refusing to make any appropriate enquiries as to the installation of the waterstop should be factored into account. He posed the question whether the Owners Corporation should have to put up with something less than the pristine finish for which they contracted in circumstances where they have incurred the time and expense of litigating this issue 'to the death', where the issue as to lack of visible waterstops could have been dealt with some time ago between experts (T25/26). It seems to me that the desire for a pristine finish (and the reasonableness of the rectification proposed by the Owners Corporation) is not something to be measured by reference to the conduct of the Builder in putting the Owners Corporation to proof of what they have contended (nearly 7 years after completion of the works) to have been a problem requiring the complete re-tiling of the bathrooms at considerable cost. Furthermore, had there been no waterstop issue in the first place, there might still very much be a difference in appearance now (some 10 years down the track) in the look of tiles within the bathroom depending on their location and the level and type of use in that location. (Any replacement of the whole of the bathroom tiles would still leave open that prospect of mismatched tiles as a result of future wear and tear in any event; something again going to the reasonableness issue. In other words, the 'pristine' uniform finish sought by the Owners Corporation might always have had only a temporary duration.) 254 Mr Elliott submits that the very fact that the complete re-tiling proposal was put forward (without explanation or industry support) by Mr Goddard in the first place casts doubt on the reliability of his reports (and that his failure to accept, prior to cross-examination, that that Mr Beard's approach to remediation was reasonable and consistent with the Guide (T 145.24) tells against his impartiality). Mr Elliott in any event maintains that on no objective assessment could any work reasonably extend beyond minor and inexpensive works to install waterproofing immediately adjacent to the shower door. The alternatives put forward by Mr Beard in this regard were, first, to remove and replace tiles in the immediate vicinity of the shower screen and install a waterstop (if reasonably matching tiles could be sourced) (para 18 of his 20 May affidavit) or, alternatively, if reasonably matching tiles could not be sourced, to remove and replace the tiles on the floor of the shower recess (para 19 of that affidavit). The latter alternative would cost about $2,895.60 per shower. 255 In responding to Mr Goddard's 'compromise' solution, which is at a higher cost than that identified by Mr Beard, Mr Elliott notes that this involves not only replacing the floor tiles in the shower recess, but also the wall tiles up to a certain point so as to create an 'architectural break' (para 5 of Mr Goddard's 22 May affidavit) (T 142.41) but that there was no evidence as to why preference should be given to the manufacture of an 'artificial break' of this kind, rather than making use of the existing features in the bathrooms which could just as readily serve this purpose, namely the line of the shower screen and the edges of the floor. Mr Elliott notes that, almost without exception, the physical breaks identified in the Guide to Standards and Tolerances are present in respect of the shower floor alone (being the surface Mr Beard had identified), a fact accepted by Mr Goddard (at T 142.41ff). 256 In submissions in reply, Mr Cheney put forward (as I understand it, for the first time) a concern as to whether the alternatives identified by Mr Beard would address the need for the underlying membrane to turn up the wall and behind the first row of wall tiles. This was not an issue put to Mr Beard in cross-examination nor was it addressed in the evidence adduced by the Owners Corporation. In circumstances where Mr Beard did not express any concern as to the efficacy of the solution he was putting forward and had taken me in some detail through the intricacies of the waterproofing membrane and the need to preserve its impermeability, I would have confidence in adopting the solution proposed by Mr Beard. In particular, Mr Beard did not express the view that the removal of wall tiles would be necessary (T 235.45; 260.10-50), nor ultimately did Mr Goddard (T 151.23-35 cf T 150.1). 257 Mr Elliott's submission was that Mr Goddard had simply sought to inflate the Owners Corporation's claim. Although Mr Goddard did concede in cross-examination that all he had done was come up with a different and more expensive design (T l52.19), I did not understand him by this to be conceding that he had by so doing deliberately inflated the claim. I understood him to be conceding, rather, that his was a more expensive way of doing the same job as that which Mr Beard's proposal would also do. That said, I agree with the observations of both Mr Elliott and Mr Loewenstein as to the arbitrary and seemingly inflated nature of the costings put forward by Mr Goddard (and, not surprisingly, Mr Cheney did not ultimately seek to rely on them). 258 This makes it unnecessary to consider what was the subject of quite justified criticism and scorn, namely Mr Goddard's flat $892 per square metre rate (one of the more noteworthy components of which being the time allocated for tradesmen parking in the carpark and waiting for the lifts). 259 As to the means of rectification, I consider that the alternative solution put forward by Mr Beard should be adopted (though not his first recommendation of "sectional' replacement of only the immediate tiles in the shower recess), namely that the floor tiles within the showers in the affected units (2C, 3A, 6A and 7B) should be replaced, making use of an appropriate existing architectural break. I do not think it is necessary from a rectification point of view that there be, nor do I consider it reasonable for the Owners Corporation to insist upon, the complete re-tiling of the entirety of the bathrooms. 260 I accept the submission of Mr Elliott that to the extent that the Owners Corporation is entitled to damages to allow for the retro-fitting of waterstops in any of the bathrooms, the damages would be quantified on the basis of the solution put forward by Mr Beard and quantified at $2,895.60. 261 In light of my findings above, I consider that only units 2C, 3A, 6A and 7B require rectification for breach of any statutory warranty and the quantum of damages in this regard is $14,478.00 (being $2,895.60 per shower for the 5 shower areas, there being two in unit 7B). (b) Air-conditioning Introduction 262 The second main aspect of the works which it is said amounted to a breach of statutory warranty was that in relation to the air conditioning. 263 The Owners Corporation again contends that there were breaches of a number of the statutory warranties in this regard - as to s 18B(a) in relation to defective workmanship because of a failure properly to commission the system in accordance with the mechanical services specification; as to s 18B(b) as to defective materials in relation to the use of the three way valves; as to s 18B(e) as to reasonable fitness of occupation; and as to s 18B(f) as to reasonable fitness for specified purpose. 264 The pleading itself does not clearly link the particulars of breach of the statutory warranties to the subsections in the Act (so, for example, the particulars to paragraph 11 provide general particulars of defective installation and materials in the air-conditioning system as installed without reference to fitness for purpose and then provide particulars as to the failure to install a ventilation system which was fit for purpose). However, during oral submissions (and by reference to Mr Field's report in the written submissions), Mr Cheney made it clear that he was relying not only on the warranties under s 18B(a) and (b) in relation to the air-conditioning and ventilation system but also the warranties in (e) and (f) in relation to the air-conditioning and ventilation system (see the discussion at T 325-326); and that was my understanding of the basis on which the case had been both run and defended. 265 Insofar as complaint is made about the air-conditioning system supplied under the building contract, while the Builder accepts that there is some incidental work (somewhat dismissively described in Mr Elliott's submissions as requiring 'tidying up'), for which it is liable in the sum of $4,884.38, it otherwise denies liability. It says that the system which it supplied was the system the Builder was instructed and contracted to supply and, as such, the Builder did not breach its contract. 266 There seems no doubt that from the outset of the life of this building there were serious problems with the operation of the air-conditioning system. The fundamental problem, as identified by the joint experts, with the operation of the system was the absence of balancing valves (see para 68 of Mr Field's report). The experts also seem to be agreed that had there been a proper commissioning of the system (in the sense of acceptance testing and/or a combination of calibration and acceptance testing) any deficiencies in performance of the system would have become apparent prior to completion of the works. The immediacy with which the air-conditioning seems to have failed (as per Dr Hines' account) suggests that this was not just a situation of 'reduced capacity', it was a situation of no capacity or no capacity in particular parts of the building. 267 The Builder's expert, Mr Field, in his report annexed to his affidavit of 31 October 2008 said that the type of system installed, if correctly designed, commissioned and adequately maintained should have performed well for 15-20 years. However, the system in his view was not correctly designed (due to the lack of "chilled and heating water control valves", which seems to be understood as a reference to the missing balancing valves). Significantly, he said that the continuing failure of the chiller compressors was attributable to the apparent lack of commissioning and the system not being adequately maintained. The initial failure of the chillers, in his view, was either that the design was defective or the commissioning of the chillers had not been undertaken in a satisfactory manner. A methodical commissioning of the system would, in his view, have revealed any deficiencies with achieving the design flow rates through each fan coil unit. If so, then I can only assume that a proper commissioning would have revealed the extent of those deficiencies and alerted the Builder that there was a serious problem in this regard. 268 Given that the experts are broadly agreed that the reason for the failures in the operation of the air-conditioning system was the lack of any balancing valves (which contributed to and/or was responsible for the mechanical failure of the compressors in the chillers), it is difficult to see how the system could have been properly calibrated in the first place, though the experts do not seem to have separately addressed that question.

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269 The Builder concedes that there was not a complete commissioning of the air-conditioning system, though it disputes the contention that there was no commissioning at all (and the evidence supports the conclusion that some commissioning was indeed carried out). However, the Builder disputes the contention that it is liable for the whole of the costs claimed for air-conditioning. On the worst case, the Builder contends that its liability in relation to the air-conditioning claims (including the small sum conceded for the insulation defects) is limited to no more than about $125,000 (as opposed to the sum of about $290,000 sought by the Owners Corporation). 270 There are a number of issues which arise for consideration in relation to the air-conditioning claim - what was meant by the obligation to commission the system and what damages flow from its breach; is the Builder liable in relation to the design installation aspects of the claim; is the Builder liable for the replacement of three way valves or for commissioning and other costs after 2003? I consider those in the context of the particular warranties which are said to have been breached. 271 Before so doing, I note that Mr Elliott drew a distinction between the work involved in the installation of the system and that involved in the commissioning of the system, a distinction which goes both to the question whether there has been a breach and the damages for any such breach. Mr Cheney, for his part, does not concede that there is a relevant distinction (at least insofar as he submits that the calibration of the system during installation is part of the composite process of commissioning). 272 In fact, it seems to me that the relevant distinction is between a claim based on the defective design of the system and its commissioning (a distinction which is relevant in the context of the claim based on the warranty of fitness for purpose). 273 I say this because it seems that the only substantive defect identified in the actual process of installation related to the commissioning of the system (and perhaps by inference the calibration of the system controls whether as part of or anterior to that commissioning). The actual components of the system (apart from the three way valves which were said to have been faulty) and the manner of their installation were not identified as defective in the joint experts' report. 274 The joint report signed by the respective air-conditioning experts, Mr Obrart and Mr Field, after their conclave (Exhibit C) comments on the technical aspects of the claim and addresses each of the allegations made in paragraphs 11(a) and (b) of the particulars provided in the Owners Corporation's claim. Of those, the experts were unable to comment on a number of items (solenoid valves - 11(a)(ii); allegation of defective installation of three way valves - 11(a)(vii); 11(a)(ix); 11(a) (xii)); a number of items were said to be satisfactory or assumed to be satisfactory or not defective (thermostat - 11(a)(iii); appropriate controls - 11(a)(vi); 11(a)(xi); and it is stated that no defects were identified in the ventilation system apart from a failure in the installation of grilles - 11(b)(iv). 275 The areas in which defects were found were as to the balancing valves (a matter which seems to me to go to the design of the system which was approved in amendment to the one provided for under the original specifications, hence the initial findings of Mr Obrart as to non-compliance with specifications as he was not taken to the varied plans in this regard), seal installation, insulation around pipes and insulation blocking exhaust. Of those items, the cost of rectification has been quantified at $4,884.38, excluding the balancing valves. (This is the amount for which the Builder concedes liability on the air-conditioning claim. They represent, as I understand it, discrete items which are not themselves said to be causative of any substantial failure of the system at any time.)

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276 Where the experts identified defective work on the part of the Builder was in the area of commissioning. The concept of "commissioning", as used in the industry, appears to encompass both what might be termed acceptance testing of the system after its installation (in other words, the carrying out of a test run of the system in order to ensure its functionality or, in the words of the Owners Corporation's air-conditioning expert, Mr Obrart, the process of checking and verification - T 97.26, followed by correction of problems emerging from that process of verification) and the (presumably anterior) setting or calibration of the system or its component parts to permit the system to operate as designed (covering matters, as I understand it, such as the level at which certain of the controls are to be set). 277 Therein lies some of the confusion which, with no disrespect to Counsel, seemed to emerge during the course of oral submissions in relation to the ambit of the air-conditioning claim, and which led to the service of supplementary written submissions after the close of the hearing, in relation to aspects of the overall air-conditioning claim (particularly as to whether it a failure of commissioning was responsible for the ongoing chiller repairs). 278 Mr Obrart seemed to confirm in the witness box that the sense in which his report used the term 'commissioning' was in the former sense, ie of the process of acceptance testing. However, in effect, what Mr Cheney submits is that the joint experts' report speaks to the composite commissioning process under which the setting or calibration of the system controls is part of final acceptance testing. 279 The distinction between the two aspects of commissioning becomes relevant when determining what loss has been suffered by a failure to perform the task of commissioning properly in compliance with the statutory warranty in s 18B(a). 280 If 'commissioning' is used in a different sense from the process of acceptance testing (which seems to be suggested by reference to the use of the term in the contract specifications - see Section 14 Scope of Mechanical Work, p1158ff Exhibit E, which draws a clear distinction between the commissioning required and the acceptance testing required for the various aspects of the air-conditioning/ventilation systems), then the relevant question leading from a failure properly to commission the system is what loss can be shown to have been caused from the failure to calibrate (or set the controls) properly in the first place. As a practical matter, this then gives rise to the question whether, once the system was properly calibrated (or commissioned, in that more limited sense of the word), it can be established that subsequent equipment problems or failures were referable to that initial commissioning failure (as opposed to anything which was later done in addressing the initial problems). This seems to be the foundation for the Builder's allegations as to failure to mitigate on the part of the Owners Corporation and the suggestion that any faults after 2003 were due to a failure properly to re-commission the system by the Owners Corporation's own air-conditioning consultants.

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285 A finding that there has been a breach of the s 18B(a) warranty is therefore not controversial. The question is what loss flows therefrom. At paragraph 68 of the report is the finding by the experts (on which much weight is placed by the Owners Corporation for the identification of the damages which have been suffered as a result of the failure properly to commission the system) that the ongoing equipment failures and lack of documentation 'point strongly' to a lack of commissioning by the contractor. 286 The contract specifications called for a commissioning of the system. The joint experts' report concludes that the ongoing equipment failures point to the lack of commissioning. Implicit in this is a conclusion that, had there been a proper commissioning carried out, then the underlying problems which caused the ongoing equipment failures would have been discovered. 287 Integral to the Builder's submissions on the air-conditioning issue, however, seems to be the proposition (not accepted by the Owners Corporation) that the consequence of the failure fully to commission the air-conditioning system was limited to the possible identification during that process of the fact that (without the presence of balancing valves) the system would have had reduced capacity. It is said for the Builder that the reduced capacity of the system as installed was something already identified and accepted at the time that the air-conditioning design was varied (referring to Exhibit E pp 590, 563) and hence it cannot be inferred that the Developers would have done anything to address the situation had the deficiencies been revealed at the time the air-conditioning works were completed (which was around 20 May 2000). 288 The Owners Corporation points to the report of the Builder's air-conditioning expert (Mr Field) for the proposition that it is not only the problem caused by the absence of the balancing valves which would have been revealed by a proper commissioning but that what would also have been revealed would have been "any deficiencies" with achieving design flow rates through the fan coil unit and with achieving satisfactory refrigerant pressures and safety cut outs with the chillers (Exhibit E p 1060). 289 Insofar as the Builder says that all that would have been discovered at that stage would have been something already known to the Developers (namely that the system as installed had a reduced capacity to that provided for under the original specifications), and that there is no reason to think that anything would have been done about it at that stage, it seems to me that at the very least what was lost (by the failure properly to commission as at completion of the works) was the opportunity for the Developers at that stage to discover the problem caused by the lack of the balancing valves (and its potential ramifications for the overall workability of the system) and to address this before there were failures caused to the compressors and the like. 290 As to what the Developers would have done had they been aware of the extent of the problems, it defies belief that the Developers (even if hell-bent on maximising their profits, as it seemed to be suggested by Mr Elliot that they would have been) would have not sought to take some steps to protect against losses of the kind which were subsequently incurred in attempting to make the system operational, particularly had they been made aware of the likely extent of the problems at that time and of the likely consequences of leaving the system 'as built' (and given that the cost of installation of the balancing valves as a separate cost does not appear to be of great magnitude). (In that regard, the Developers, by accepting the Builder's submissions, might be said implicitly to have adopted the position that had they known about the deficiencies caused by a lack of balancing valves they would nevertheless have taken no steps to remedy the problem, but there was no direct evidence of that and, vis a vis the Owners Corporation, it would not lie in the mouth of the Developers to assert that had they been aware of a failure of the system as installed to comply with the specifications for its intended use they would have done nothing about it.) 291 In any event, at the very least the consequence of the failure properly to commission can be measured by the costs subsequently incurred in seeking to identify the cause of the problems and in costs thrown away by endeavours to repair the system which would not have been undertaken had the true cause been appreciated at that stage. 292 Does the loss go any further? While both experts seem to be agreed that the deficiencies in operation of the system were caused by the lack of balancing valves (which would have been revealed on a proper commissioning of the system prior to completion of the building works) they have not identified any other particular cause of the problems. They did, however, recognise that a lack of balancing valves would have potentially caused other mechanical failures (such as to the compressors in the chillers). 293 This gave rise to the question whether the ongoing equipment repairs (after the time at which the balancing valves were installed) in relation to the chillers were costs for which liability is to be borne by the Builder by reference to the breach of this particular statutory warranty. Are those costs caused by any failure properly to commission? 294 For the Builder, it is accepted that the expert evidence indicates that mechanical failure may be caused by the lack of balancing valves but the Builder says that this should have been addressed when the valves were installed (in December 2002/January 2003) and thereafter any problems with the chillers must be due to a failure in the recommissioning of the system after the introduction of those valves. Therefore, at worst, the Builder contends that the breach of this warranty sounds in damages for rectification costs up to the replacement of the balancing valves. (Similarly, the Builder contends that the cost of rectification of any other problems arising after the replacement of the balancing valves, a significant proportion of the air-conditioning claim, must be referable to what work was carried out when the balancing valves were replaced and is therefore not referable to any initial failure by the Builder for which it should be held responsible.) 295 What seems to have occurred, as alluded to above, is that the damage to the chillers was addressed before it was realised that there was a balancing valve issue. Hence, as confirmed by Mr Field, the initial work on the chiller compressors was a failure and further repairs to the chillers were in due course required after the balancing valves had finally been installed. 296 Insofar as the Owners Corporation contends that the cost of work from May 2003 to January 2006 is recoverable as it was directed at making good the 'discrepancy' between the designed and actual capacities of the 'as built' system as initially installed and commissioning the rebuilt chiller systems, this seems to go to the design aspects of the system and not to a breach of the s 18B(a) warranty.

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297 In this regard, the difficulty I have in relation to the s 18B(a) claim is that the relevant finding of the joint experts (that the ongoing equipment failure was indicative of a failure to commission the system properly) does not address in detail what was there meant by 'commissioning' (and must be read in the context of the further finding that there was no defect in the chillers). 298 As to the chillers, Mr Elliott emphasises that the joint expert report indicates that there was no defect in installation. When addressing the allegation of alleged installation of defective or inadequate chillers, the report stated that, in summary, there was no evidence to indicate that the chillers were defective (noting that the selection of the chiller had been approved by George Floth and that it had noted the reduction in capacity and stages of unloading) and that in the absence of commissioning data it was not possible to verify that the essential are cooled condenser performance was satisfactory (para 13). In particular, the report noted in para 12 that had commissioning been completed and documented in accordance with the George Floth specification then any deficiencies or inadequacies would have been discovered including deficiency in heat rejection of the condenser throughout its operating range. (As to quality of components it was said that there was no reason to question the quality of components of the chillers.) Mr Elliott notes that Mr Obrart's initial report indicated that the chillers that were supplied did not correspond with what was called for under the contract specifications (Exhibit E p1744) but that, by the time of the experts' conclave, Mr Obrart was satisfied this was not a defect. 299 The evidence discloses that there was an amendment to the specifications in this regard (though whether it was formally made a variation to the contract is a matter of dispute between the Builder and the Developers). Mr Elliott says that it should be inferred that this was duly approved by the architect and that it was pursuant to this approval that different chillers were provided from those in the original specifications. (The evidence to which I was taken in relation to this issue is found in Exhibit E at pp1897, 1899, 560, 563, 2821 and 2866 and in Mr Field's report paras 3-9.) 300 Mr Obrart accepted that what he had commented on at the time of his initial report was compliance with the contract as initially executed and that he was not purporting to (and did not) comment at that stage on any differences between what was supplied and what was in fact required by the contract as varied from time to time (T 105). He appeared to accept that the contract specifications had been altered from those appearing in the plans as provided to him for the purposes of his report. 301 Mr Cheney, in supplementary written submissions served pursuant to leave given on 2 June 2010 urged a finding that the works itemised on the Schedule of Air-Conditioning/Ventilation Work handed up in court (including the works itemised at pp 110, 117, 119, 163, 174, 227 and 229 of Exhibit E) formed part of an ongoing programme of chiller repairs performed by or on behalf of the Owners Corporation and necessary to achieve an acceptable operating performance from the chillers following their rebuild in 2002/3. 302 In making that submission, Mr Cheney referred to the report of Mr Hartwell on 5 June 2002 that both compressors to chiller no.1 and a compressor to chiller no.2 had burnt out (Ex E p 59) and that it was necessary to carry out work to bring the plant to an operational standard. That work was the work carried out in December 2002 and January 2003 (costing $32,529.19 per invoice of 20 January 2003). Further work was then performed in March 2003 to rectify the chillers, that being work "the need for which had not been apparent in our initial assessment", according to Mr Hartwell's affidavit (para 19) (costing $21,914.30 per invoice 3 April 2003, and see p 107 Exhibit E). The inference I would draw from Mr Hartwell's description is that this was work which was necessary back in January but that had not been appreciated at the time (although I can see an alternative construction which is that there had been no need for it at the time because it had only later become necessary). 303 However, the work in issue seems to be that from May 2003 onwards, in which it is said the 'discrepancy' between the designed and actual capabilities of the as built system were being made good. This seems to suggest that the problems being addressed in that later period were in relation to the design of the system as installed (ie bringing it to the standard of the original specifications prior to their alteration in accordance with the works approved by George Floth). 304 Mr Cheney says that the works were required to commission the rebuilt chiller systems (referring to service reports at pp 230, 231 and 233) and notes that Mr Hartwell confirmed in 2006 that there had not been a subsequent compressor failure since the initial work was done. 305 Mr Elliott contends that this ignores the fact that the experts agreed that the chiller was not a defect and maintains that the only way that the Owners Corporation can succeed in respect of anything other than the cost of the balancing valves is to show that their absence caused particular damage during the period of time that they were absent. It seems to me that this is unduly restrictive. Even if the loss were limited to the damage caused by the absence of balancing valves it seems to me to be by no means inconceivable that the cost of rectification involved attempts over an ongoing period to rectify damage to compressors caused by the absence of the valves (and the need for commissioning of the system in that regard). That said, I am not convinced that the Owners Corporation has established that all of the works carried out to the air-conditioning to recommission the system were as a result of either the lack of balancing valves or the failure to commission properly in the first place. Mr Elliott contends that there is no evidence (beyond the concessions made by the Builder in written closing submissions) to establish that the invoices in question were in respect of works necessitated by the breaches and points to a lack of identification of what it is said that the Builder did or failed to do which led to the additional invoices being incurred some years after the event. 306 I accept the proposition that (absent a warranty of fitness for purpose) the Builder should not liable for design faults with the air-conditioning system as approved by the Developers (in much the same way as Lord Denning observed that the buyer of a secondhand car should realise that defects may appear sooner or later and that in the absence of an express warranty there may be no redress in Bartlett v Sidney Marcus Limited [1965] 1 WLR 1013; [1965] 2 All ER 753) even though, ironically, the relevant design decision was initially proffered by the Builder's subcontractor. Hence, insofar as it seems that it was the decision to amend the design specifications which was the direct cause of the system failure (and not any failure to commission) I accept the submission that this is not in itself a breach of the warranty contained in s 18B(a).

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309 I note, however, that given my further finding below that there was a breach of the s 18B(f) warranty, and the damages recoverable by the Owners Corporation for that breach, the fact that more limited damages are recoverable for breach of the s 18B(a) is not material in the overall result for the Owners Corporation (and only has potential relevance in relation to the question of how liability as between the Builder and the Developers is to be apportioned). s 18(b) 310 The alleged breach of this warranty relates solely to the cost of replacement over the years of the three way valves. The submission was made by Mr Elliott (T 385.25) that the replacement valves installed by the Owners Corporation's subcontractor, MM Brown, were the same three way valves as those previously installed (which had failed) and that they had been used for the same purpose as that for which it was now contended they were unfit. 311 In Mr Cheney's supplementary written submissions of 4 June 2010, he points out that only 10 of the replacement valves were the same as those which had previously failed (referring to para 33 of Mr Youl's affidavit) and that the great majority were different valves (as a result of which extensive changes to the pipework were required) (referring to Mr Hartwell's letter of 8 April 2004 and his subsequent letter of 22 May 2006 (Exhibit E pp 131 and 234/5, respectively)). Reference was also made to the service reports at pp 148, 152, 154, 156, 160, 180, 184, 185, 187, 197, 202, 204, 206, 208, 214, 216, 220 and 222 - which evidence the modification of pipework or wiring in the context of the replacement of the valves. Mr Cheney submits that even if the replacement valves were identical it does not answer the proposition that those initially installed were faulty (and had failed). He says that the Owners Corporation's complaint is that "whatever valves were used they were not "good and suitable for the purpose for which they are used" and "reasonably fit for the specified purpose" within the meaning of the statutory warranties. 312 What is not clear to me is whether it is suggested that this batch of valves was unsuitable for the purpose etc, or whether it was the pressure from the lack of balancing valves that caused them progressively to fail or that was a consequence of a failure to calibrate the system properly. Nevertheless, the joint experts seemed prepared to accept that the need for replacement of the valves during this period was indicative that they were "substandard". 313 Mr Elliott's response by way of submission on 9 June 2010 (to which Mr Cheney takes objection) is that the claim for breach of warranty as to adequacy of materials was abandoned (and for that reason there was no cross-examination of Mr Obrart on the issue), noting that Mr Field was not cross-examined at all. 314 Further, he contends that the Owners Corporation has not proved what the valves used were or what their typical life expectancy would be or (more significantly) that if the valves had failed before they normally would that was due to a breach by the Builder as opposed to the way in which the system was maintained or upgraded. He submits that it is absurd to suggest that even though some of the replacement valves were identical, all of those installed by the Builder were unsuitable and none of the replacements was. 315 Mr Cheney contends that paras 7-10 of these submissions (encapsulated in the above) should not be received as no leave was given for yet further submissions on this issue. On a more substantive note, he contends that the Owners Corporation's case was always on the basis that the three way valves were faulty (para 11 (vii), that the opening submissions made it clear that it was only the warranty as to the quality of the materials being new that was not pressed (T 5.29) and that if the Builder chose to run its case on a different basis that is a decision to which it should be left. 316 What was said in opening by Mr Cheney was that the warranties on which the Owners Corporation principally relied were all bar paragraph (b) "that is we don't take the point that there was a failure by the Builder to use materials that were new" (T 5.28), pointing to the 'overarching warranty' in (e) that the building be reasonably fit for occupation. Mr Cheney contended that it was no answer for the Builder to say that it had built in perfect conformity with the design because, by reason of the statutory warranties the Builder had promised that the building, as constructed, would yield the desired result - a building suitable for occupation as a dwelling (referring to the statutory protection from what might otherwise seem the harsh consequence of such a result in s 18F - though I note that there was no pleading or reliance placed on this section). 317 Mr Cheney did, however, confirm that the Owners Corporation does not seek to recover amounts spent on routine maintenance of the air-conditioning system (pointing in that regard to the expenditure of $18,000 plus GST annually spent on routine maintenance in answer to the allegation of a failure adequately to maintain the system). 318 As to the three way valves, while it is asserted by the Builder that there is no evidence as to their unsuitability, the opinion of the experts in conclave seems contrary to this. As to the items noted in the particulars numbered 11(a)(v), 11(a)(vi), 11(a)(viii) - being failure properly to install balancing valves, proper sized balancing valves and the correct type of three way valves, it was said in essence that this was a defect referable to the failure of Quitstar to include balancing valves and the failure of George Floth to identify that omission and that (as to the three way valves) the "reported failures and subsequent replacement indicate substandard materials" (see paras 37/38; 45).

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326 The Builder contends, and I accept, that the evidence discloses that what the Builder installed was an air-conditioning system with amended specifications approved by the Developers' consultant (namely, to include the installation of three way valves in place of 'stat' valves). 327 It is submitted by the Builder that, as between the Builder and the Developers, with whom the Builder contracted to install the air-conditioning system, it would not be for the Developers now to complain that the system (assuming it was properly installed and commissioned) did not work satisfactorily or had a 'reduced capacity' and that, by extension, it is not open to the Owners Corporation to do so. 328 However, the extent of the deficiencies which emerged in the operation of the air-conditioning system strongly supports the inference that this is not a case of reduced capacity; rather this was a system which was incapable of performing as it was required to do - namely to meet the Mechanical Services Specification (Exhibit E p 1152) that it 'be capable of providing full capacity to living areas as demanded' (my emphasis). 329 I do not accept the Builder's contention (unsupported by any authority and not based on any particular wording in the legislation) that the statutory warranty imported into the contract by s 18B(a) has any primacy over the warranties in the remaining sub-sections (in particular, over the s 18B(f) warranty of fitness for purpose as specified by the contracting party). I would be inclined to accept that where a party (here, in effect, the Owners Corporation through the Developers' consultant) nominates that a particular air-conditioning system is to be installed that party is not (unless expressly so stating) specifying a particular purpose for which that system must be reasonably fit so as to call into operation the warranty in s 18B(f). (That said, it would still be necessary that the system be properly installed in compliance with the warranty in s 18B(a) and, on the authority of The Craftsmen, that the materials supplied as part of the system be good and suitable for purpose.) 330 The approval given by the Developers' consultant to an amendment of the air-conditioning specifications does not alter the fact that the Builder was obliged under the contract to provide an air-conditioning system that met the mechanical specifications in all other regards, including that it ensure an even temperature, achieve comfort conditions within the entire unit and be capable of providing full capacity to living areas as demanded. That seems to me to be a very clear specification of purpose so as to give rise to a s 18B(f) warranty. In other words, what the Builder warranted was that the system (with the specifications as approved by the Developers) would nevertheless meet the overall requirements of the air-conditioning system as specified (albeit that the system as amended would have a reduced capacity from that initially proposed). 331 The Owners Corporation contends that the undisputed finding of Mr Field was that there was a failure of the air-conditioning system (Exhibit E p 1055 para 6.6) and that this establishes a breach both of s 18B(a) and s 18B(f) in relation to the installation of the air-conditioning system, regardless of whether those failures result from the installation of a system which met the specifications of the approved amended design (and that this issue goes at most to the relative culpability between the Builder and the Developers). I consider that it establishes a breach of the warranty in s 18B(f).

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332 As to the quantum of the loss suffered by reason of the breach of this warranty, it seems to me that it covers the installation of the balancing valves and the re-commissioning of the system (as well as the ongoing chiller repairs up to the period at which the chillers were replaced following the replacement of the balancing valves). 333 While there seems no dispute that the Builder is not liable for ongoing maintenance of the system (a matter conceded by Mr Cheney in opening submissions), this does not seem to be reflected in the inclusion of various invoices relating to what seems, on the face of those invoices, to be no more nor less than ongoing or routine maintenance. It seems to me that the claim, as evidenced by the invoices since 2003, is not restricted so as to exclude such amounts and that a careful exercise needed to be carried out in reviewing carefully the invoices in question akin to that carried out by Mr Obrart for the period to 2003, having regard to the findings I have made. On a review of the invoices (based solely by reference to the description of the work on those invoices) a number of those which on their face seem to me to fall outside the limits of the damages for which I have found the Builder liable. 334 Mr Elliott was understandably critical of the fact that (unlike the invoices up to 2002), no exercise was carried out to exclude from the claimed invoices those referable to routine maintenance items (such as checking the system or moving a light). The response for the Owners Corporation seemed in essence to be that the invoices were in evidence and the court could make its own assessment of what should or should not be excluded - though there were further submissions made in this regard after the close of the hearing, by leave. 335 Mr Elliott further submits that since the sole feature of the system, as installed, that led it to operate at less than optimum level was the absence of balancing valves, once that issue was addressed by installing balancing valves there could be no liability for any costs referable to the system.

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336 Insofar as there were works carried out in the period from 2003 to 2004 by MM Brown to replace damaged equipment, install the balancing valves and recommission the system, the Builder submits that any breach by the Builder of the contract in 2000 (in either the non-supply of balancing valves or the absence of a full commissioning) cannot have caused the Owners Corporation to incur any cost or suffer any loss once the balancing valves were installed in 2003-2004. Thus it is contended that if, contrary to the Builder's principal submissions, the court concluded that there were breaches of warranty causative of some loss in relation to the commissioning of the air-conditioning system then, at the highest, those losses are limited to invoices for work done in the period 2000 to 2002 for work of the kind likely to result from the state of the system as installed; the cost of installation of the new equipment and performance of the recommissioning work; the cost of installing the balancing valves to improve the performance of the system; and Mr Youl's cost of supervising those works. 337 I accept the submission of the Owners Corporation that the need for ongoing work to re-commission the system was necessary for the whole of the period claimed, and hence there is not a definitive cut-off point at the time of installation of the balancing valves as the Builder contends, but have excluded from the calculations those amounts which seem to me to be referable to routine maintenance items or inspections as well as items (such as replacement of fans or thermostats) which do not seem to have been linked to the omission of balancing valves (unlike, for example, the chiller repairs) and were not identified as defects by the experts. Mitigation 338 In his report, Mr Field also referred to what he considered to be a failure to undertake a commissioning to re-set balancing pressure and safety levels when the compressors were replaced in 2002 - see Exhibit E p 1060. However, there is nothing to show that, had the re-commissioning been carried out differently at that stage, the ongoing costs would not have been required. 339 As to the issue of maintenance, I note that there is evidence that the Owners Corporation did have in place a system of maintenance through external contractors. I find that the Owners Corporation took reasonable steps to appoint experienced consultants to advise in relation to the problems and acted on the basis of that advice. The fact that they referred the matter to independent consultants (rather than the Builder's sub-contractor) does not seem to me to be a basis for criticism of the Owners Corporation (it seems, rather, to be redolent of the level of the dissatisfaction with the Builder's sub-contractor). Similarly, the fact that MM Brown/Youl & Associates may not have detected the problems with the balancing valves as early as they could have done (or may not themselves have recommissioned the system properly) does not go to any failure on the part of the Owners Corporation to take reasonable steps to mitigate their loss and does not sound in any reduction of their damages (though it might perhaps amounted to an intervening event in the chain of causation, this was not pleaded as such). The mitigation issue seems largely to be based on the comments made by the Builder's expert as to the industry practice of ongoing commissioning in relation to air-conditioning systems. However, in circumstances where experts seem to have been constantly involved from an early stage in relation to the attempts to rectify the system, I am not satisfied that there should be any reduction in the damages otherwise recoverable on that basis. Conclusion 340 I find that it is likely that a full commissioning would have revealed serious deficiencies in the balancing of the system such that it is likely that steps would have been taken at that stage to install balancing valves and that, by reason of the failure to effect a proper commissioning, the Developers lost the opportunity to take appropriate steps to remedy the situation. Whether they would then have done so is not known but what would not have been necessary (had the deficiencies been identified at that stage) would at least have been the costs incurred in investigation of the complaints and the unsuccessful replacement of the chiller compressors (which were destined to fail in any event absent the introduction of balancing valves). 341 Further, I consider the Builder is liable for the failure to deliver a system reasonably fit for its specified purpose and I would infer that it was in breach of the warranty for suitable materials in relation to the three way valves so I would allow all of the air-conditioning costs other than the items referable to routine maintenance or the items referable to replacement of thermostats/fans etc which were not identified by the experts as defective.

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(c) Scott Schedule items 342 As to the other building works are alleged to have been defective, which are the subject of the Scott Schedule, the Builder has accepted a number of the claims. For the most part, however, the Builder submits that they are not defects resulting from any breach of warranty, and the Builder has no liability ini respect of them. Further, even in respect of those for which the Builder accepts a liability to make rectification, it is said that the quantum of the Owners Corporation's claim is grossly excessive. 343 Both Mr Cheney and Mr Elliott handed up Scott Schedules addressing their respective client's position on these items. 344 In Part A of the Builder's Scott Schedule are listed the various items that are agreed both as to defect and quantum are identified (the amount accepted by the Builder is $42,989). In Part B of the Scott Schedule, the remaining disputed items are identified. 345 By way of general comment, the Builder submits that Mr Goddard did no more than identify what he saw and what it would cost to address what he saw (T 60.33) but at no point did he express the opinion that anything he saw in 2008 was caused by something done defectively by the Builder in 1999-2000. 346 So, for example, Mr Elliott submits (and it seems difficult to argue against the logic of this) that the fact there is one cracked tile in a bathroom in 2008 is not evidence of the Builder having done anything defectively when the building was constructed some eight years before, it being entirely likely that the crack was caused by something done by an owner or occupant during the course of eight years of occupation. 347 Secondly, by way of general comment, the Builder notes that Mr Beard made references to the Guide to Standards and Tolerances to explain why certain things that were seen by both he and Mr Goddard in the units are not properly to be regarded as defects requiring any repair. 348 Broadly speaking, Mr Beard characterised the defects identified by himself and Mr Goddard as falling within six categories - cracking to tiles; dampness to floor tiles; cracking to walls; cracking to ceilings; drummy render to walls and the swimming pool area. 349 Addressing each of the main categories of Scott Schedule claims in turn, I note as follows. Cracking to tiles 350 The Owners Corporation claim the cost of rectification of various cracked tiles in the complex. It is by no means apparent (unlike the position with the ceiling cracks) that these are evidence of defective workmanship (as opposed to normal wear and tear or other events for which the Builder would not be responsible). 351 Mr Beard referred to the Guide, which provides that cracking less than 1mm wide is not to be regarded as a defect [3/1000] and that tiles are defective when caused by the builder's workmanship when they become cracked in more than 5% of the tiled area within 24 months from completion [3/1026]. It is submitted by Mr Elliott that Mr Goddard referred to the provisions of the Guide (9.4(i) at 4/1454 and T 168.7-14) he supports his view that confirmed that what appears in the Guide is consistent with concepts well understood in the building industry prior to its publication (T142.20). 352 Notwithstanding this, it is said that on other occasions an item was not a defect and that without any explanation, Mr Goddard refused to concede that certain of the items were not defects even though they fell within the relevant criteria in the Guide. 353 Mr Cheney criticises the fact that Mr Beard has relied upon the Guides to Standards and Tolerances in determining whether the cracked tiles would be said to be a 'defect' as such. This criticism seems to be based on the stance adopted by Mr Goddard (who had identified cracked tile throughout the complex) as to the reliance placed by Mr Beard on the Victorian Building Commission's 'Standards and Tolerances 2007' publication. 354 In particular, it is said that Mr Beard's observations both as to the width of cracking and as to the area occupied in total by cracked tiles are not supported by reference to the 2007 Guide. Mr Goddard has annexed to his affidavit (Ex E p1691) the version of the Guide dated 1 April 1999, which includes (in clause 9.1 the statement that tiling will be considered defective where the builder has supplied, laid and constructed the sub-strate for the tiles and any of the materials are defective, and/or the application of adhesive, tiles or backing sheet is not carried out in accordance with manufacturer's instructions, and/or there is unsatisfactory workmanship beneath the tiling system. Hence, it is submitted that there is no percentage guide to assist in determining whether the existence of cracked tiles is indicative of poor or defective workmanship. Mr Goddard has expressed the opinion that "in a premium block such as the Kirribilli Grande Units, any number of drummy, loose or cracked tiles constitutes defective tiling and is not acceptable." 355 The difficulty with this is that I place little weight on Mr Goddard's opinion, since it seems to me that he has not approached his task in an unbiased manner and, in any event, the existence of a small percentage of cracked tiles some eight years after completion of the works in question would be consistent with fair wear and tear or the activities of the occupant since acquisition of the unit(s) in question. (Presumably, there was a defects survey at the time of completion of the owners' purchase of the units from which it would have been apparent if there were cracked tiles at that stage. In the absence of evidence of the existence of the cracked tiles at that time, and of anything to suggest that subsequent cracking is a result of defective workmanship, it seems to me that the Owners Corporation has failed to establish a breach of warranty on this aspect of the claim. 356 Mr Cheney places weight on the fact that Mr Beard's affidavit of 20 May 2010 (Ex E p3103) is silent about these matters, in circumstances where he otherwise replies to the matters raised in Mr Goddard's affidavit. However, it seems to me that the existence of cracking some eight years after the completion of the works is an insufficient basis to determine that there was defective work in the installation of the tiles in the first place. Dampness to floor tiles 357 Other than where I have dealt with this issue generally in the context of the bathrooms, I note my findings on the attached annotated Scott Schedule in relation to units 2C and 7B. Cracks to ceilings 358 The Owners Corporation contends that the existence of cracks to the ceiling establishes a breach of the statutory warranties set out in s 18B(a) and s18 B(f) of the Act. There is broad agreement both as to the existence of cracks to the ceilings and that this is indicative of defective workmanship. Mr Beard has addressed the appropriate manner of repair in paragraph 10.5 of his report (Exhibit E p 927) and I adopt his findings. Drummy render 359 The Owners Corporation has claimed that the existence of 'drummy render' (described in paragraph 9.3 of Mr Goddard's report (Exhibit E p1454) as the failure of render to adhere to the brickwork with the result that, when tapped, the render gives off a hollow sound), amounts to a breach of the statutory warranties in s 18B(a) and s 18B(f), respectively, (ie performance of work in a proper and workmanlike manner and that work be reasonably fit for purpose). 360 The experts are broadly agreed as to the cause and existence of drummy render and that there were areas of drummy render regarding rectification, though there is some divergence as to precisely which areas were 'drummy'. At paragraph 10.6 of his report (Exhibit E p927), Mr Beard concurs in general that the areas identified as 'drummy' by Mr Goddard required rectification. The areas Mr Beard has a different opinion are noted in section 12 of his report and the Scott Schedule. There was considerable disagreement between the experts as to the appropriate means of rectification in relation to some areas of render and as to the cost of rectification. 361 In particular, the respective experts differed on a massive scale as to what constituted a reasonable rate for repairing drummy render. Mr Beard's rate was of the order of $90 m2. Mr Goddard's rate was $892 m2. 362 I accept that Mr Beard explained, in a clear and intelligible manner, how his figure had been derived and identified where from within Rawlinson's costings guide he had obtained his figures. I accept that Mr Beard was not prone to exaggeration and that in places he had allowed more than the Rawlinson's rate where he considered that appropriate. 363 Mr Goddard's evidence in this regard was not persuasive and was ultimately not pressed by the Owners Corporation. 364 In Part B of the Builder's Scott Schedule, there are some items of drummy render which are accepted as defects, but in respect of which no agreement has been reached as to quantum. The Builder contends that, in respect of each item, Mr Beard's figure should be preferred to that of Mr Goddard. Broadly speaking, I agree. Swimming pool area - paving/pool skylight framing 365 Mr Cheney notes that both experts accept that the swimming pool tiles are extremely slippery when wet (Mr Goddard at Exhibit E p1483 and Mr Beard at Exhibit E p953). The Owners Corporation submits that the use of a 'dangerously slippery' tile to the pool surround is indicative of a breach of the warranty implied by s 18B(f) of the Act. Mr Beard advised that a non slip coating should be applied by way of rectification (Exhibit E p953). Mr Goddard's view is that the severely cracked tiles should be replaced (Exhibit E p1484). Mr Beard has agreed in the joint report (Exhibit A) that the cracked tiles at the northern end of the pool should be replaced. 366 The experts seem to be agreed that the pool skylight was "very poorly constructed" (Exhibit A at item 9.20). The Owners Corporation submits that this indicates a breach of the warranties in s 18B(a) and s 18(f) of the Act. I agree. Similarly, the experts seem to be agreed that the mortar joints between the sandstone blocks were failing and allowing water to penetrate (Exhibit A at item 9.21), reflecting a breach of s 18B(a) and s 18B(f) of the Act. Underfloor heating 367 There are 4 units (1A, 1C, 2C and 7B) where it is said that the underfloor heating to the bathrooms does not operate. The agreed position of the experts is recorded in Exhibit B. The experts limited their comments to the technical aspects relating to the question whether the underfloor heating was reasonably fit for its intended purpose. Mr Tsikas' findings and conclusions in his affidavit of 25 March 2009 as to units 1A and 1C were agreed (to the effect that there is a break in the circuit, causing the heating not to operate) (Exhibit E p2994). The cause of the failure of the heating to the other units has not been identified. Mr Ford, the Builder's expert, inspected units 2C and 7B in late 2007. As to unit 2C, the experts could not agree because of different test results as between November 2007 and March 2009. It was agreed that the thermostat was likely to have been changed by Mr Ford in 2007. Mr Ford accepted that the underfloor heating was not working at the time that Mr Tsikas inspected the unit in March 2009. As to unit 7B, again the experts were unable to agree. There were, apparently, inconsistencies with insulation resistance of other elements. 368 Generally, it was agreed that the low resistance could be caused by poor connection at the cold tails and that a number of problems could have caused the low readings such as damage to the element itself. 369 The Owners Corporation submits that there has been a breach of the statutory warranties in s18B(a), s 18B(e) and s 18B(f) of the Act. Mr Elliott submits that even if there is a breach of these warranties it relates to a faulty electrical connection and there is no evidence that the cost of rectification involves removing the bathroom flooring. The costs of the repair were said to be $750 (with which Mr Elliott says the Builder does not cavil if it is found that there were defective works in this regard, but says that there is no evidence that this requires the replacement of bathroom tiles.) 370 It seems to me that it is unlikely to be coincidental (given that the underfloor heating expert (Mr Tsikas) emphasised the need for no moisture in the connections) that the units in which there was a late onset of problems with the underfloor heating were units 2C and 7B. Therefore I would be inclined to think that in these units at least the failures were caused by the bathroom waterproofing defects. I would also allow in this regard the cost of removal of the limited number of floor tiles in order to carry out work to ensure the cold tail connections and heating elements are in order, since that seems to me to be a reasonable task. Conclusion 371 As to the Scott Schedule items, I was provided with Scott Schedules prepared by the Owners Corporation and the Builder respectively and I attach a marked up Scott Schedule (adapting the version provided by Mr Elliott which includes Mr Beard's costings) which indicates my findings on the various items claimed. 372 Broadly speaking, I accept Mr Beard's analysis as to the various items claimed. In particular, it seems to me that it is difficult, in the absence of evidence to suggest that isolated instances of cracking were evident as from the date of completion of the works, to find that such items were due to defective workmanship on the part of the Builder. However, in relation to the underfloor heating (where the likely cause, according to the joint experts seems to be poor electrical connections) although it is submitted by the Builder that there is no way of knowing whether those problems were evident at the outset or emerged through normal wear and tear (or even from lack of use) over the period until complaint was made of those items, I am of the view that an inference could be drawn that the waterproofing problems in units 2C and 7B over that period may well have caused or contributed to the failure of the underfloor heating in those units and I would allow for the cost of rectification in those units (which, according to Mr Tsikas, is likely to require the removal of a small number of tiles). ($1,500 for the cost of rectification of underfloor heating works in 2C and 7B plus the cost of removal of the limited number of tiles required for that purpose.) 373 Where Mr Beard has accepted defects in items such as drummy render, I have in general adopted his findings. The Builder accepts that liability in respect of Part B items in the sum of $7,761.71 the agreed sum in Part A of the Scott Schedule, for which the Builder accepts it is liable is $50,750.71 in respect of all claims other than those dealt with under the air-conditioning and bathroom floor tiles issues earlier in these submissions. To that amount should be added the underfloor heating sum.

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(ii) Limitations Defence 377 The Developers contend that the Builder's contribution to any liability the Developers owe to the Owners Corporation should be 100% because the Builder was in breach of its obligations under the building contract. 378 The Builder relies on s 18E of the Act. It is submitted by the Builder that it is not open to the Developers to make such a cross-claim because they did not do so within seven years of completion of the building works. In this regard, the Builder submits that the cross-claim upon which the Developers now rely did not include an express allegation that the Builder had breached any statutory warranty until well after seven years following the completion of the building works (accepting that such completion occurring in June 2000). 379 The cross-claim upon which the Developers initially relied, as filed in the District Court, was merely a claim for contribution. As amended, the cross-claim filed in this Court claimed contribution or indemnity for amounts for which it might be adjudged liable to the Owners Corporation. The claim was put (on a basis no longer pressed) under the statutory right of contribution between joint tortfeasors and in the alternative based on the existence of a co-ordinate liability - ie for equitable contribution. A claim for damages for breach of contract based on the statutory warranties implied into the building contract was not articulated in the pleading, though it is based on the same underlying facts as the contribution claim. 380 The Builder submits that the whole of any liability to the Owners Corporation should be apportioned equally as between the Developers and the Builder, save for the cost of the installation of the balancing valves which the Builder says should be met by the Developers alone (that being referable to a fitness for purpose claim based on the circumstances in which the design of the system was amended before final installation). 381 The Developers, for their part, contend as I understand it that, having sought relief as against the Builder by way of the first Cross-Claim filed in the District Court on 9 May 2007 (founded upon whatever liability might be established in the proceedings) , the Cross-Claim was brought within time. In the alternative, it is submitted that insofar as the Cross-Claim claims relief on the basis of a breach of statutory duty pursuant to s 18B of the Act then the cross-claim is within time notwithstanding that the pleading of that particular basis for contribution or indemnity was not made in the Supreme Court until the filing of the Amended Technology & Construction List Cross-Claim Statement on 25 March 2010. Mr Loewenstein contends that the claim for damages, contribution or indemnity based upon breach of statutory warranty is essentially based upon a re-pleading of the obligations (and the breach thereof) pleaded in the Owners Corporation's Technology & Construction List Statement and must reflect the extent to which the Owners Corporation are successful against the Builder.

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382 It is submitted by Mr Loewenstein that, for the purposes of s 18E of the Home Building Act, the reference to the 'proceedings' for breach of statutory warranty (which must be commenced within seven years from completion of the work) is a reference to the primary or initiating proceedings and not to any subsequent cross-claim for relief in respect of such initiating proceedings. 383 The term "proceedings" is used in different contexts in the Civil Procedure Act and the Uniform Civil Procedure Rules. In s 22 of the Civil Procedure Act 2005, for example, the term appears to be used in the context of an individual set of proceedings commenced in the court and being given a separate court file number. In Part 9 Rule 9, the word is used by reference to the commencement of a particular claim (ie, 'proceedings on a Cross-Claim'). 384 Mr Loewenstein submits that to read 'proceedings' in s 18E of the Act as requiring any cross-claim to be commenced within the seven year limitation period would lead to a result that could not have been the intention of the legislature. So, for example, it is said that it would have the result that if primary proceedings seeking relief by a proprietor against a builder for breaches of some or all of the statutory warranties under s 18B were brought one day before the expiration of the seven year limitation period and served a day after its expiration that would prevent any cross-claim being maintained by the builder (presumably whether that be against the proprietor or a third party or by any such third party and any other party). It is therefore submitted that the proceedings by way of cross-claim are to be distinguished from the primary proceedings for relief brought by the Owners Corporation and that the cross-claim for breach of statutory warranty brought by the Developers can be maintained. 385 Absent any authority addressing specifically the meaning of "proceedings" in the s 18E of the Act, a review of the cases which have considered the term in other legislative contexts would certainly suggest that, at least for the purposes of the court rules, the concept of "proceedings" includes all claims brought within the umbrella of the set of proceedings comprised within the one court file. However, that does not, I think, assist in determining whether the legislature was intending by s 18E to make provision for the time at which any claim or proceeding within an umbrella set of proceedings was to be commenced for limitation purposes. 386 To the extent that the approach adopted by some cases is to define "proceedings" by reference to what best achieves the objects of the legislation in question, then this may or may not add force to Mr Loewenstein's submission. On the one hand it might be thought that the effect of s 18E cannot be to prevent any cross-claim being made in respect of primary claims made at the very end of the limitation period. On the other hand, if Mr Loewenstein's contention is correct there is simply no limitation period at all for such cross-claims provided they are brought within the umbrella of the same set of proceedings or court file number and there is hence the uncertainty of knowing when or whether any such cross-claim could be brought. 387 The Limitation Act 1969 (NSW), by contrast with the terminology of s 18E, requires that the "cause of action" be brought within the limitation period (as opposed to the "proceedings" being commenced). 388 Cases considering the meaning of "proceedings" in other legislative contexts indicate that rather than there being one uniformly accepted definition of the term, courts have adopted varying definitions of "proceedings" according to overriding purpose and operation of the particular legislation in question. 389 In Blake v Norris (1990) 20 NSWLR 300, Smart J stated (at 306 - 307): The defendant pointed out that the word "proceeding" was used throughout the Act (except in headings which are ignored for the purpose of statutory construction of the Interpretation Act 1987, s 32(2) rather than the term "proceedings". The defendant submitted that the Act contemplated that out of the whole of the proceedings in the Supreme Court there may be transfer of part only.

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Any assistance as to its meaning has to be derived from the statutory context and the objects of the legislation in question. 390 In Oates v Consolidated Capital Services Ltd (2009) 257 ALR 558; (2009) 233 FLR 283; (2009) 72 ACSR 506; [2009] NSWCA 183, the meaning of "proceedings" was considered to similar effect in the Court of Appeal, at [116]: Third, there is no definition of "proceedings" in the legislation. The word "proceedings" is capable of covering the whole variety of forensic exercises which may occur in a court: Proust v Blake (1989) 17 NSWLR 267 at 270 per Samuels JA (with whom Mathews J agreed); Re Doran Constructions Pty Ltd (in liq) (2002) 194 ALR 101 ; 168 FLR 116 ; 20 ACLC 909 ; [2002] NSWSC 215 at [100]-[102] and cases there cited. There is nothing about the word "proceedings" in itself that could make it inapplicable to an application for leave to be given to Mr Oates to bring proceedings asserting CCL Australia's right to bring a derivative action that enforces the rights of CCL UK. The question though, is whether a meaning of " proceedings " that extends so far is the intended one in the context of s 236. 391 In Qantas Airways Ltd v AF Little Pty Ltd [1981] 2 NSWLR 34, the Owners Corporation of a defective building initially sued the architects and engineers for the defective works and later sought leave to amend the statement of claim and join the builders as defendants. Consequently, the Court of Appeal came to consider whether the amendments and joinder of the builder would facilitate the resolution of the "matters in dispute in the proceedings". Counsel for the builders in that case opposed the motion, arguing that the joinder was barred by the Limitation Act, as the cause of action against the builders accrued more than 6 years before the joinder application. 392 Mahoney JA examined the history of the rules concerning joinder of parties and claims and stated (at 54-55); I do not think that "matters in dispute" should be given that narrow meaning. The words should be interpreted widely and beneficially … I should add that it does not follow … that all claims made by a plaintiff in the alternative against another prospective defendant will fall within the rule. The matter will be determined by categorising the particular claim proposed to be made and determining whether it has the necessary relationship to the "matter in dispute" in the proceedings as already constituted . (my emphasis)

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thus suggesting that 'proceedings' there bore the meaning considered above as being the set of proceedings before the court and encompassing all claims made under the one court file number. 393 Similarly, in Gladstone Park Shopping Centre Pty Ltd v Ross Wills (1984) 2 FCR 334, (1984) 55 ALR 387, Jenkinson J held that "proceedings" encompassed all the claims and cross-claims which share the same serial number and that the word seemed to signify that which is done ("trial or hearing and all other steps") in curial resolution of those claims for relief which are comprehended within a single application or cross-claim (at 337). In that case, Jenkinson J considered whether a cross-claim by a respondent to proceedings alleging misleading and deceptive conduct, joining the agent of the respondent alleged to have engaged in the misleading and deceptive conduct, fell within the scope of the one "proceedings". Jenkinson J held that the cross-respondents were parties to the proceedings and were within the jurisdiction of the court despite not otherwise being a party to the proceedings so that an order for costs could be made under s 43 of the Federal Court of Australia Act 1976 (Cth) binding the cross-respondents. Jenkinson J stated (at 336-337); The very generally expressed provisions conferring discretionary power to award costs of "all proceedings" may in those circumstances be understood as authorising, in relation to an action, an order for payment of any one party's costs by any other party or parties to that action. But the Federal Court Rules 1979 (Cth) have no provision corresponding with O 16, r 1 and O 16, r 5. Except where the adaptation for use in the Federal Court Rules 1979 (Cth) of the Rules of the Supreme Court of New South Wales has been imperfect (as, for example, in O 5, r 11(6) and O 6, r 3(1)(a)), the word "proceeding" seems to serve, in the Federal Court Rules 1979 (Cth), the purpose which the word "action" serves in most of the rules relating to civil procedure in the English High Court and the Victorian Supreme Court and in the High Court of Australia. A careful reading of O 5 of the Federal Court Rules 1979 (Cth), which relates to cross-claims and third party claims, leaves me uncertain whether a person before the court only by reason of the filing of a cross-claim to which he is respondent is a party to the "proceeding" on what is sometimes called, in that Order, "the originating process". The use of the plural "proceedings" in O 5, r 6(1) may be the result of an unintended transcription of that word from the New South Wales rules, wherein the plural is habitually used. But it may, I suppose, have been intentional. If a third party, such as the agents are, does not become, in any sense, a party to the proceeding in which the applicant is a party, it may be a question whether s 43 of the Federal Court of Australia Act 1976 (Cth) authorises an order that the applicant pay that third party's costs. In O 5, r 12 the word "proceeding" seems to comprehend all the claims and cross-claims which share the same serial number, assigned in compliance with O 1, r 6. Elsewhere in O 5, and particularly in r 11 thereof, the word seems to signify that which is done ("trial or hearing and all other steps") in curial resolution of those claims for relief which are comprehended within a single application or cross-claim. If the word "proceedings" in O 5, r 6(1) may be understood as comprehending all that shares the same serial number, as I think it may, there is in my opinion no sufficient reason to doubt that any party to those proceedings may be ordered, in exercise of the jurisdiction conferred by s 43, to pay to any other party the latter's costs. 394 In William Gary Quick v Stoland Pty Ltd [1998] FCA 1200, Finkelstein J addressed the issue of the meaning of proceedings by reference to what would give effect to the statutory purposes of the legislation being considered, stating; However, it is not necessary to reach any concluded view on the precise meaning of "proceedings" in s 588R(1). It is sufficient to hold that the word should be taken to mean, at the very least, any process by which a claim under s 588M is made in a court of competent jurisdiction. Such a claim may be made in an originating process. If it is, that process could only be commenced with the consent of the liquidator. It would also include a claim made by way of amendment to an existing proceeding. It is the claim made by the amendment which is the means by which the creditor seeks to "recover from the director, as a debt due to the creditor, an amount equal to the amount of the loss or damage" suffered by the creditor. It conforms with the object of s 588R(1) if "proceedings" are taken to include both the commencement of an action at law and any step in that action: compare Eddy v Stewart [1932] 3 WWR 71 at 74; Re Carrick Estates Ltd (1987) 43 DLR (4 th ) 161. 395 In Whiley Investments (Qld) Pty Ltd v Pet's Paradise (Qld) Pty Ltd [2009] VSC 144, Davies J stated: [18] The expression "proceeding" is not defined in the Case Transfer Act. As Smart J observed in Blake v Norris "[t]he word "proceeding is capable of … a variety of meaning[s]" and "[a]ny assistance as to its meaning has to be derived from the statutory context and the objects of the legislation in question". The expression ordinarily refers to the "method permitted by law for moving a Court or judicial officer to some authorised act"; "the means or vehicle by which the subject matter of a dispute [is] brought before [a] court for adjudication".

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[21] It is plain, in my view, that "proceeding" is used in the same sense in the context of the Case Transfer Act, that is, as the action or cause initiated by the appropriate process. The scheme of the Act, which provides for the transfer of civil proceedings, bears out that the Act is concerned with transferring, as between courts, the action or cause. 396 Section 18E itself contemplates that more than one set of proceedings may be brought within the period (sub-s (2)), although there seemingly contemplating the commencement of more than one set of proceedings for the enforcement of the statutory warranties by a party in the position of the Owners Corporation. 397 While it seems to me that "proceedings' is apt to encompass the whole of the processes (or forensic exercises) that come before the court under the umbrella of one court file number, it does not seem to me that this amalgamation of court processes assists in determining the time at which a particular claim should be commenced within that overall set of processes (ie the primary proceedings under the umbrella of which a variety of claims and cross-claims may be brought). The construction for which Mr Loewenstein contends would have the result that, once a court file was opened, any claim brought on that file would be within time but (perhaps leading to surprising and inconsistent results) any claim brought separately of that court file would have to be brought within the time limit provided under the Act and hence could be statute barred. 398 I accept that the meaning of the word needs to be determined having regard to the purpose of the legislation and of the time limit fixed by that section. Having said that, in Minister of Employment and Workplace Relations v Gribbles Radiology Pty Ltd [2005] HCA 9; (2005) 222 CLR 194, at 208, the majority of the High Court identified a need for caution in seeking to discern the legislative purpose of particular sections of a statute, emphasising the need to consider the words of the section when seeking to discern the legislative purpose : It is only if some a priori assumption is made about the intended reach of the provision that considering its purpose casts light on the question [that question being how far the extension of the operation of awards went beyond those party to the dispute in question]. To reason in that way begs the question. Rather, it is necessary to consider the words of the provision. It is there that the intended reach of the legislation is to be discerned. 399 Similarly, in Kavalee v Burbidge (1998) 43 NSWLR 422, Mason P noted that a purposive construction of the legislation there being considered (the notional estate provisions in the Family Provision Act 1982 (NSW)) was only possible insofar as any question of construction presented a choice. 400 Here, there is certainly room for different constructions. However, the consequence of a construction against which Mr Loewenstein contends does not seem to me necessarily to have the difficulties he envisages, particularly in circumstances where it is open to the court to grant leave under s 64 of the Civil Procedure Act for, inter alia, claims to be filed which are out of time. It is difficult to see how a scenario of the kind he postulates would not lead to the grant of leave for the commencement of a cross-claim out of time. 401 "Proceedings" in general seems to be a term used to encompass all actions and causes of action within the one file (ie a set of proceedings) and each step or forensic exercise within that file (which can thus include a cross-claim). 402 Logically "proceedings" in s 18E would seem to me to encompass all claims which might be brought for breach statutory warranty whether in the one set or proceedings or in separate proceedings. I see nothing in the wording of the section or the content of the Act more generally to warrant the suggestion that each claim would not need to be brought within time, ie only the primary or initiating proceedings would be required to be commenced within the limitation period. 403 Therefore, it does not seem to me that this is a scenario which should compel a construction of s 18E which seems to me to strain the language of the section. A proceeding for breach of statutory warranty (by way of summons, statement of claim or cross-claim) would in my view be encompassed within the general reference to "proceedings" and all would be under the same limitations period. 404 If this were to be tested, a contrary interpretation (of the kind contended for by Mr Loewenstein) would mean that if the Owners Corporation had sued the Builder but not the Developers, and no cross-claim was brought in the Owners Corporation's proceedings, but later a separate proceeding was commenced by the Builder against the Developers for contribution (after the substantive claim had been determined) that claim made in that separate proceeding would be required to be within the 7 years but not the former. This strikes me as illogical and prone to produce inconsistent results. It would also mean that once a party was joined to the original proceedings there would be no time limit within which that party would be required to bring any cross-claim, absent any court rules which contemplated such a course of action within a particular time. 405 The adverse consequence feared by Mr Loewenstein is capable of amelioration by reference to the court's powers to permit claims to be brought in existing proceedings out of time. 406 In any event, it does not seem to me that anything of substance turns on this in these proceedings, since I do not accept that for the purposes of s 18E of the Act, a claim for equitable contribution is a proceeding for breach of statutory warranty (albeit that it may be based on a co-ordinate liability for such a breach.) It is, rather, a claim in the equitable jurisdiction of the court deriving from principles of justice as between those subject to a common liability. 407 There is no time limit prescribed under the Limitation Act for a claim for equitable contribution. Further, notwithstanding that the co-ordinate liabilities or common obligations themselves arise in respect of breaches of statutory warranties, there is no analogy to be drawn between these claims for contribution and some other provision in the Limitation Act for the purposes of s 23 of the Act as a possible bar to the claim. 408 Section 23 of the Limitation Act provides that: 23 Equitable relief Sections 14, 16, 17, 18, 20 and 21 do not apply, except so far as they may be applied by analogy, to a cause of action for specific performance of a contract or for an injunction or for other equitable relief. 409 As noted earlier, the cross-claim based on s 5 of the Law Reform (Miscellaneous Provisions) Act was conceded as having no foundation and is not pressed. As the Owners Corporation's claim is based on breach of a statutory warranty, and not in tort, there is no statutory equivalent to a claim for contribution, as there is as between a claim for contributions between joint tortfeasors. 410 In Belan v Casey [2003] NSWSC 159, Campbell J considered the operation of s 23 in relation to a claim for equitable contribution and stated (from [144]):

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(my emphasis) 411 Here, the existence of a claim for contribution in respect of co-ordinate liability for breach of the warranties implied by statute, as between the Builder and the Developers, does not attract the operation of an "analogous provision" being applicable under s 23 of the Limitation Act in circumstances where there are no contractual or statutory rights of contribution "identical" or "concurrent" to the claim for equitable obligations of contribution, having regard to the principles discussed by Cohen J in Manufacturers Mutual Insurance v GIO (1993) 7 ANZ Ins Cas 61-158; (1993) Aust Contract R 90-023. 412 There, Cohen J, considered at length the issue whether, and when, s 23 of the Limitation Act will apply such that a limitation will apply to a claim for equitable contribution and said (from 12): There may be a limitation on proceedings brought in equity where the cause of action can be likened by analogy to a claim at law. This will arise in circumstances which were set out by Lord Westbury in Knox v Gye (1872) LR 5 HL 656 at 674 as follows: "Where a Court of Equity assumes a concurrent jurisdiction with Courts of Law no account will be given after the legal limit of six years, if the statute be pleaded. If it could be doubted whether the executor of a deceased partner can, at Common Law, have an action of account against the surviving partner, the result will still be the same, because a Court of Equity, in affording such a remedy and giving such an account, would act by analogy to the Statute of Limitations. For where the remedy in Equity is correspondent to the remedy at Law, and the latter is subject to a limit in point of time by the Statute of Limitations, a Court of Equity acts by analogy to the Statute and imposes on the remedy it affords the same limitation. This is the meaning of the common phrase, that a Court of Equity acts by analogy to the Statute of Limitations, the meaning being, that where the suit in Equity corresponds with an action at Law which is included in the words of the Statute, a Court of Equity adopts the enactment of the Statute as its own rule of procedure. But if any proceeding in equity be included within the words of the Statute, there a Court of Equity, like a Court of Law, acts in obedience to the statute." Thus there must be a clear limitation on a common law action to which the equitable remedy corresponds. A number of examples are given in Meagher, Gummow and Lehane at para3415. There is required initially a limitation of the equivalent common law claim. Where there is none then any limitation by analogy does not apply. Many equitable claims are not affected by the Limitation Act, either directly or by analogy but there still remain the defences of laches and acquiescence: see s9 of the Limitation Act.

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If there is no common law limitation there can be no analogy in respect of the identical claim made in equity. The unusual development of the principles of contribution indicate that it has in reality been an equitable doctrine which has been adopted by common law. It could not in those circumstances be said that it is correspondent to an action at law but rather that the action of law is based upon the requirements of equity to do justice. In my opinion there is no provision within the Limitation Act which it could be said equity should act upon by analogy. 413 The discussion by Cohen J, indicates that an analogous provision for the purposes of s 23 will exist where it can be said the claim for equitable contribution and the alleged analogous claim are identical and concurrent in equity and common law. An equitable claim for contribution would seemingly only have a corresponding or identical claim in contract if it could be said that the contract imposed similar obligations of contribution (as opposed to the situation here where the contract simply makes the Builder liable for breaches of implied terms and warranties to the Developers, which happen by virtue of the operation of the Act to be the terms upon which the Owners Corporation relies). 414 (I also note that section 23 provides for the application of an analogous provision of the Limitation Act to apply in fixing a certain limitation period, not that time runs from when the corresponding claim runs. Until such time as a finding of liability to the Owners Corporation is made, it is arguable that the time for commencement of any claim for contribution would not run even if there were an applicable time limitation, having regard to the authorities that suggest that the cause of action for equitable contribution arises, once a co-surety has paid more than their proportion owing (Davies v Evan Humphreys (1840) 6 Meeson Welsby 153; (1840) 151 ER 361, per Parke B, at 368-369, approved by Lord Eldon in Craythorne v Swinburne (1807) 14 Ves 160 ; (1807) 33 ER 482 ; Ex parte Snowdon; In Re Snowdon (1881) 17 Ch D 44, at 48) or become liable to pay more than the proportion owing (or perhaps at the earliest when liability as between the co-sureties is ascertained, which in the case concerning a judgment debt will not be until judgment debt has been determined Wolmershausen v Gullick [1893] 2 Ch 514, at 529). (This would not seem to be affected by the fact that in equity there could be anticipatory relief granted to a co-surety on principles of contribution: McLean v Discount and Finance Ltd (1939) 64 CLR 312, at 341 per Starke J; Wolmershausen v Gullick (see also Abigroup Ltd v Abignano (1992) 39 FCR 74, and Manufacturers Mutual Ins. Ltd v GIO.) 415 I therefore find that the Developers' claim for contribution against the Builder is not statute barred. As I do not consider that the claim for damages for breach of statutory warranty takes the matter further than the claim for contribution, the fact that a claim of that kind was not pleaded prior to the expiration of the seven year limitation period is not an issue. Had it been an issue, the fact that the claim arose out of exactly the same facts as the contribution claim (and that the issues were already before the court in the context of Hung Wai's contribution claim) permitted an amendment in order to allow that claim to be brought out of time in any event. 416 Had I construed the cross-claim for equitable contribution made by the Developers to be a claim for breach of statutory warranty falling within s18E (and thus subject to the limitations period specified in that section as the Builder seemingly contends), then it would follow that the claim by Hung Wai (for contribution or indemnity in relation to any liability "which may be adjudged due from the [Developer] to the [Owners Corporation]", where that claim was pleaded in proceedings which themselves involved nothing other than claims for breach of statutory duty by the Owners Corporation) must be seen as a being a claim for liability in respect of (and in this context 'for') breach of a statutory duty and hence sufficient to satisfy the section (even though the particular basis for the claim for contribution/indemnity was not identified until the amendment to the Developers' pleading in March 2010). (However, that would have left open the position of the Waterhouses, whose cross-claim was not served until after the expiry of the limitation period.) As it is, for the reasons adverted to earlier this question does not arise.

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(iii) Cross-claims between defendants 417 It is submitted by the Builder that if the Builder and Developers are liable to the Owners Corporation in the same amount by reason of the operation of the Act, their respective liabilities are co-ordinate so as to attract the doctrine of equitable contribution. Both have an obligation or liability to make good the one loss; Albion Insurance Co Ltd v Government Insurance Office (NSW) (1969) 121 CLR 342 per Kitto J, at 350. There, his Honour noted that persons who are under co-ordinate liabilities to make good the one loss must share the burden for that loss pro rata. His Honour made reference to the statement in Dering v Winchelsea (1787) 1 Cox Eq Cas 318, at 321 that contribution is 'bottomed and fixed on general principles of justice'. The liability to contribute arises where one party has paid or is liable to bear more than that party's fair share of the loss. Giles JA in James Hardie & Co v Wyong Shire Council (2000) 48 NSWLR 679: What underlies the notion is not a common liability to be sued but a common risk the burden of which should, if it falls unequally, be adjusted. 418 When considered in the context of the maxim that equality is equity, it is not surprising that the prima face position is that in such a case each co-obligor should contribute equally (Armstrong v Commissioner of Stamp Duties (1967) 69 SR (NSW) 38, at 43.) 419 It is accepted by both the Builder and the Developers that any liability each may bear to the Owners Corporation under the claims as brought by the Owners Corporation in these proceedings can be characterised as a co-ordinate liability for the purposes of the doctrine of equitable contribution. 420 Can there be an unequal or proportionate contribution ordered in respect of the parties' acknowledged coordinate liability? The authors Meagher, Gummow & Lehane of the text, Equity Doctrine and Remedies, 4th ed, Butterworths, 2002, would seem to suggest that this cannot be the case, having said (at [10-055]) that the fact that parties must be equally liable for the same obligations underlies the inability to apportion liability between them other than equally (contrary to cases of contribution between tortfeasors pursuant to statute). 421 In On Equity, Lawbook Co., 2009, however, the authors, Young P., Croft C. and Smith M., suggest that this may be possible though the cases in which it would occur would be rare. The authors note that the person upon whom a disproportionate burden has fallen may look to the other for contribution (citing McLean v Discount & Finance Limited, at 341) such that no one who owes a common obligation pays more than his or her share of the burden (citing Burke v LFOT Pty Limited (2002) 209 CLR 282, at 289); preferring the term "common obligation" to "co-ordinate liability" (as referred to by McHugh J in Burke). 422 What is emphasised by the authors of On Equity is that equality in this context means "proportional" contribution - either equal or proportionate where the amount of liability is different (referring to Burke and Mahony v McManus (1981) 180 CLR 30, at 38). Reference is made in particular to the dicta of Kirby J (in his dissenting opinion in Burke) as to rateable proportions where the degree of culpability is unequal (at 324-326). The authors go on to note, however, that the court will not lightly depart from its rule of equal contribution. 423 In Burke, Kirby J stated (from [174]): In cases of unequal culpability, a question arises as to whether equitable doctrine has moved on so as to recognise (as statutory entitlements to contribution have done) that a court ordering contribution may apportion the contribution of the co-obligors in a just and proportionate way. Observations favourable to this possibility have been made in Australian courts. The weight of authority, and perhaps the history of contribution to this time, appear to be against unequal apportionments. Given the purpose and character of contribution as an equitable remedy, I am unconvinced that, as a matter of principle, rateable apportionment in differing amounts is alien to the notion of contribution. I incline to the view that equity aids "the ascertainment of what would be a just contribution". If unequal contributions could be ordered, proportionate to the differing responsibilities of the co-obligors, that facility could, in some circumstances, solve the types of argument that were advanced for Mr Burke in this appeal. It would permit adjustment of contributions by reference to considerations such as culpability, causation and notions of unjust enrichment.

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One difference between contribution at law and in equity was that at law an obligor could not maintain an action until he had actually paid more than his just proportion. Equity, however, acted quia timet, and ordered contribution upon entry of a judgment against the plaintiff for the debt or liability concerned, even though the judgment was unsatisfied: see Albion at 351. 428 From my reading of decision of the Full Court in Bialkower, it would seem that the court there did more than reserve the question as to what would be the position under the common law and went on to make the following observations, in obiter, questioning the power of a court to award apportionment unequally (at 546): However, despite the observation of Davies J in Jones at 565 that he could see no reason why equity "should not aid … the ascertainment of what would be a just contribution", we doubt whether the general law of contribution authorises an apportionment such as that made by the primary judge. Contribution is "founded on equality" ( Albion at 351), though it is true that "equality" in the maxim "equity is equality" is not literal equality, but proportionate equality: Re Steel (dec'd) [1979] Ch 218 at 225-6. Equality was the basis of the doctrine of contribution between trustees liable to make good a breach of trust: Jacobs' Law of Trusts in Australia (6th ed, 1997) p 644. If one paid more than his share he could claim contribution from the others. In exceptional cases the rule of equal contribution was replaced by a right on the part of one trustee to obtain an indemnity from the others. But, according to Snell , until the intervention of statute (Civil Liability (Contribution) Act 1978 (UK) ss 1(1), 6(1) and 7(3)) there was no intermediate position between these two extremes: Snell's Equity (29th ed, 1990) p 296. And see Jacobs at 644. The matter was not argued before us, and since the apportionment can be supported by s 23B of the Wrongs Act, we need not decide the issue, which will be a live one in jurisdictions such as New South Wales which do not have a provision such as s 23B. (emphasis added) 429 In Duke Group Ltd (In Liq) v Pilmer, at 495-496, the primary judge ordered contribution in unequal portions (from 383); the proceedings against Quilty and Singleton and the first defendants claim indemnity or contribution by reason of breach of fiduciary and statutory duties. The same basis of claim is also made against Harold Abbott, Lee-Steere and Somes as well as a claim in negligence, it being alleged that they were in breach of a duty of care to the first defendants. No proceedings for indemnity or contribution have been instituted by any of the director defendants against the first defendants.

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430 This order was subject to a separate appeal, a point noted by the High Court in Pilmer v Duke Group Ltd (In Liq) [2001] HCA 31; 207 CLR 165; (2001) 75 ALJR 1067; 180 ALR 249, at 298-299, although the issue whether unequal apportionment may be made for equitable contribution was not discussed, and it was noted that in that case, any unequal apportionment was done under the Wrongs Act 1935 (SA). 431 I have found for the Owners Corporation against the Builder and the Developers in respect of breaches of one or more of the statutory warranties in relation to the bathroom claims (those being in respect of units 2C, 3A, 6A and 7B); for most of the air-conditioning claims; and for part of the Scott Schedule claims. 432 The Developers contend that the Builder should bear the full liability to the Owners Corporation since that liability is predicated on the Builder's breach of the statutory warranties (and hence a breach of its contract with the Developers). The Builder contends that liability for the air-conditioning should be borne in full by the Developers and the balance borne 50/50 on the basis of an equal contribution. 433 While there is a suggestion in the authorities that in appropriate cases equitable contribution may be able to be determined by reference to the proportionate culpability of the parties, such a proposition is contrary to the traditional approach of equity in this context. 434 If the question were simply to be to determine where principal responsibility for the breaches of statutory warranty lies, that would in my view lead to a conclusion that the Builder was principally responsible for the defective workmanship and materials claims (ie the bathroom claims, part of the air-conditioning claims and the Scott Schedule claims) but the position in relation to the breach of warranty for fitness of purpose in relation to the air-conditioning system is more complicated. The Developers, through their consultant(s), made possible the completion of the works with an air-conditioning system that was not reasonably fit for the purpose identified in the mechanical specifications. The Builder then compounded what seems to have been the inevitability of failure (of a system not reasonably fit for its required purpose) by failing properly to commission the system. Had it not failed in that aspect of the works, the Developers would have had an opportunity to rectify the situation at that stage (whether or not that would have been at the Developers' cost). 435 However, the fact that the respective cross-claimants/cross-defendants bore (as between themselves) a different degree of culpability for the losses suffered by the Owners Corporation does not, on the accepted principles of equitable contribution, warrant an order that for equitable contribution other than on a 50/50 basis as between the Builder and the Developers and I would have determined the equitable contribution claims on that basis. 436 That does not finally determine the position as between the respective defendants because the Developers also have a claim for damages for breach of statutory warranties arising out of the same facts as those on which their equitable contribution claim is made. Those damages are claimed by reference to the extent of their liability to the Owners which they would otherwise not have suffered had the Builders not been in breach of the statutory warranties contained in their building contract in relation to the works. In any such assessment, one would need to take into account the extent to which the Developers' own conduct was causative of the loss. 437 Had the Builder properly commissioned the system, the fundamental deficiencies in the operation of the system should thereby have become apparent. The Developers have been deprived of the opportunity to remedy those problems at a very early stage. Just because their consultant had accepted the modification of the system suggested by Quitstar does not mean that when the shortcomings of that modification were made apparent to them they would not have taken steps to resolve those problems and thus avoided later problems arising from the failure of the system.

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438 As to the question of liability for the air-conditioning claims, Mr Loewenstein took issue with the suggestion that any conduct by the architect or by George Floth in relation to the amendment to the air-conditioning specifications was conduct by either of them as agent for the Developers and noted that no allegation of agency had been pleaded in respect of the acts or omissions of either of them. 439 Mr Loewenstein referred to the Guideline Terms of Agreement between the Developers and George Floth governing the contractual relationship between them. Further, it was said that the admission by the Developers in their Defence to the Builder's cross-claim, to the effect George Floth was the Developers' consultant mechanical engineer and approved the amendments to the specifications does not create any obligation on the part of the developer. 440 As I understand it, the basis on which the Builder contends that the cost of installation of the balancing valves (quantified at $38,740 excluding GST) rests entirely with the Developers is not based on any allegation of agency as such, but rather it is that the Builder was entitled to act on the instructions of the architect and the Developers' consultants and that it did so. 441 Insofar as the cause of the failure of the air-conditioning system was due to the lack of balancing valves, and that this was an approved variation, it is said that the Builder did not breach its contract with the Developers in terms of installation of the system. Further, it is said that because of the amendment to the specifications, even if a full commissioning of the system as installed would have led to the awareness of a need for balancing valves and a decision by the Developers to engage the Builder or someone else to retro-fit them, that would have been something for which the Developers would have been liable to pay (it falling outside the amended contractual specifications as a consequence of the variation from stat valves to three way valves). Thus, if Developers wanted to add something to the system it is said they would have had to pay for it. 442 For these reasons, it is submitted by the Builder that, when considering contribution as between the Builder and the Developers in respect of the cost of any liability for the installation of balancing valves, then if there is to be any departure from an equal pro rata contribution, the Developers should meet the whole of that cost. 443 As to the balance of the air-conditioning claims, the Builder submits that the Act renders both the Builder and the Developers liable when there is a breach of statutory warranty and that a pro rata equitable contribution is appropriate where the Builder supplied what it had been instructed to supply and that system was accepted by the Developers. The Builder points out that the Developers had the assistance of a specialist air-conditioning designer and an architect and can be presumed to have been in a position to make an informed decision about what should or should not installed. To that extent, I would be inclined to agree with Mr Elliott's submission but I do not accept that he can make good the submission that the Developers were also in a position to know what testing was satisfactory, in circumstances where there is no evidence to which I was taken to suggest that the Developers in any way were responsible to overview supervise or certify the testing. Therefore, it seems to me that while any claim for damages as between the Developers and the Builder would not include the installation of the balancing valves themselves (that being a design decision accepted by the Developers), it would include losses resulting from the late discovery of the extent of the problems likely to be caused by the design modification. 444 I am therefore of the view that the damages which the Developers have incurred by way of the Builder's breach of statutory warranties, while measured in general by the Developers' liability to the Owners Corporation do not, in relation to the air-conditioning claims include the costs referable to the installation of the system as approved by the Developers' consultant. Those were not, in my view, caused by the Builder's breaches but by the decision (made by the Developers' consultant to amend the specifications for the system. Accordingly, I do not consider that the Developers would be in a position to obtain an indemnity for liability in respect of the Owners' Corporation's liability for the breach of the s 18B(f) warranty by the Builder. Otherwise, the measure of the Developers' damages by reference to the Builder's breaches of its building contract warranties would encompass any amounts for which the Developers were liable to the Owners Corporation.

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(b) on the Developers' claim for damages for breach by the Builder of the statutory warranties implied into the building contract, the Developers are entitled to an indemnity from the Builder for any amounts for which the Developers are liable to the Owners Corporation as a result of the Builder's breaches but excluding the amounts referable solely to breach of the s 18B(f) warranty as a result of the installation of an air-conditioning system pursuant to amended design specifications which rendered it not reasonably fit for purpose and which were approved by the Developers' consultant (ie, what I have referred to as the balancing valve costs). 448 Accordingly, on the evidence put before me on quantum, I consider that the Builder and the Developers are jointly and severally liable to the Owners Corporation in the sum of $276,581.46 and that, as between the Builder and the Developers, the Builder is liable for $253,352.21 and the Developers are liable for the sum of $23,229.25. 449 I will list the matter for any submissions as to the proper quantification of the claims in accordance with my findings and as to costs. I direct the parties to bring in short minutes of order on that occasion. ********** THE OWNERS STRATA PLAN 62930 V KELL & RIGBY HOLDINGS PTY LIMITED & ORS - SCOTT SCHEDULE Part A - Items agreed by Builder Goddard report Description Amount 9.5 (i) The skirting board on western wall of foyer adjacent to master bedroom ensuite shower. $283.00 9.6 (i) Crack between the cornice and rendered wall on the southern wall of entry hall $306.00 9.6 (ii) Cracked and drummy render above the skirting board on the southern wall of entry hall $1,444.00 9.6 (iii) Vertical crack in the cement render adjacent to the vertical 'V' joint on northern wall $772.00 9.6 (iv) External corner of the cornice on north west corner of the entry hall is cracked $84.00 9.6 (x) Crack between the cornice and rendered wall on the western wall of main bedroom. $1,886.00 9.7 (ii) External corner of cornice opposite bedroom 2 doorway has cracked and there is a crack between the bottom of the cornice and the wall $152.00 9.7 (iii) Crack in plasterboard ceiling sheet adjacent to bedroom 3 doorway to be reset $168.00 9.7 (vii) Damaged base of columns behind the kitchen sink unit. $361.00 9.7 (ix) Eastern wall inside the meter room. The cement render on this wall 'drummy' $1,290.00 9.9 (i) Excessive dampness in the skirting board on the eastern end of the external aluminium sliding doors $1,597.00 9.12(i)-(iv) Water damage to the western wall and skirting board at the northern end in bedroom 2 $3,998.00 9.16 (i) The window sill in the south east corner of bedroom 4 $1,615.00 9.16 (ii) Crack between the wall and ceiling. The crack runs the full length of the east wall of fourth bedroom $878.00 9.17 (ii) The insulation in the ceiling had not been removed from around the down light. $240.00 9.17(iv) Casement window on the s/e corner of dining room. $250.00 9.19 Some floor tiles paving around the perimeter of pool. $18,315.00 9.20 The framing for the skylights around pool. $9,350.00 Total $42,989 PART B - Items not agreed by Builder Goddard Report Description Ruling Amount APARTMENT 1A - section 9.4 of Goddard Report Hairline crack less than 1mm not visible from a viewing position of 1.5m under normal lighting 9.4(ii) One cracked wall tile adjacent to toilet door in main ensuite Nil Evidence does not establish that the item was the result of defective workmanship. Hairline crack less than 1mm not visible from a viewing position of 1.5m under normal lighting 9.4(vi) 2 cracked wall tiles at top of eastern wall of guest ensuite and adjacent to toilet pan Nil Evidence does not establish that the item was the result of defective workmanship. Evidence does not establish that the item was the result of defective workmanship. 9.4(vii) Western wall of the study cracked and crazed. Drummy render. Nil In any event issue already rectified. 9.4 Underfloor heating in bathroom. No evidence that this is a defect or was caused by defective works. Nil APARTMENT 1B - section 9.5 of Goddard Report 9.5(iv) Western wall of the study cracked and crazed. Hairline crack less than 1mm not visible from a viewing position of 1.5m under normal lighting Nil Evidence does not establish that the item was the result of defective workmanship. 9.5(v) Cement render on the southern dining room wall adjacent to the window and sliding doors cracked; "drummy" areas of render on the wall. The vertical crack has loose sections of cement render around the crack. Accepted as defect. $315 9.5(vi) Crack in northern wall of laundry. This wall is also "drummy". There is also general cracking between the cornice and rendered wall Accepted as defect. $495 9.5(vii) Eastern wall adjacent to the main bedroom window is cracked and 'drummy' Accepted as defect. $315 APARTMENT 1C - Section 9.6 of Goddard Report 9.6(vii) Door to the toilet on the southern side of the guest bathroom is binding on the door jam Not common property. Nil 9.6(viii) Vertical crack in the western wall of the dining room adjacent to the southern windows. The cement render on this wall is "drummy". Accepted as defect. $365.63 9.6(ix) Vertical crack in the eastern wall of main bedroom adjacent to the southern window. The cement render on this wall is "drummy" and is to be removed and re-rendered Accepted as defect. $360 9.6 Underfloor heating in bathroom No evidence that this is a defect or was caused by defective works. Nil APARTMENT 2A - Section 9.7 of Goddard Report 9.7(i) Wall adjacent to the meter cupboard. The wall is cracked and 'drummy' Accepted this is a defect in his first report. $945 9.7(v) Western wall in hallway leading to bedrooms 2 & 3. The cement render on wall has crazed and is drummy No evidence of drummy (not disputed by Mr Goddard T175.5). Nil

[137]

(In cross-examination Mr Goddard admitted it was not a defect - T 175.44.) 9.7(viii) Western wall of master bedroom has cracked, crazed and is 'drummy'. There is a small crack between the cornice and wall. All cracks on this wall are 'Fine cracks that do not need repair'. Per Mr Goddard's report, not a defect requiring repair. Nil APARTMENT 2C - Section 9.9 of Goddard Report 9.9 Underfloor heating in bathroom Infer damage due to moisture as a result of waterproofing problem $750 Rust on arch bar over the door from dining area to balcony Evidence does not establish that the item was the result of defective workmanship Nil APARTMENT 3A - section 9.10 of the Goddard Report 9.10(i) Knobs on the vanity units that have broken off and loose Not common property. Nil 9.10(ii) Sealant has come away from between the vanity unit and the upturn in ensuite off bedroom 3 Not common property. Nil 9.10(iv) Aluminium sliding doors from living area to balcony. The doors are very difficult to bring together for locking. Not common property. Nil APARTMENT 3B - section 9.11 of the Goddard Report 9.11(i) Cracks in the ceiling and cornices. Evidence does not establish that the item was the result of defective workmanship. Nil 9.11(ii) The cement render in the dining room is 'drummy' in a number of areas Accepted as defect. $452.45 APARTMENT 5A - section 9.12 of the Goddard Report Hairline cracks of less than 1mm.

[139]

(Accepted by Mr Goddard in cross-examination that cracks did not require repair - T 177.6 and no dispute as to conclusion re drummy render - T 177.15.) APARTMENT 6A - section 9.14 of the Goddard Report 9.14(i) Cracked and drummy Issue already rectified. No loss. Nil Render on western wall, southern end of master bedroom APARTMENT 7A - section 9.16 of the Goddard Report 9.16(iv) Crack and 'drummy' render on the western wall at the southern end of the dining room Accepted as defect $762.50 450 APARTMENT 7B - section 9.17 of the Goddard Report 9.17(i) Floor waste is 2mm above floor tiles Infer defective workmanship $1,361.50 9.17(iii) Wind noise between the external aluminium doors from living room to balcony where the centre stiles of doors close against each others when the doors are fully closed No evidence to indicate that this was caused by any defective workmanship. Nil 9.17(v) Stains on the stainless steel balcony railings No evidence that this is the result of defective works. Nil 9.17(vi) Cracked and 'drummy' render in northern wall on east side of master bedroom Accepted as defect. $541.13 9.17 Underfloor heating in bathroom Infer damage due to moisture as a result of waterproofing problem $750

The Owners Strata Plan 62930 v Kell & Rigby Holdings Pty Ltd

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