The Owners Strata Plan No. 64970 v Austruc Constructions Limited & Anor

DECISION : Referee's reports to be adopted except for matters already rejected or the subject of settlement between the parties.

CATCHWORDS : CONTRIBUTION - whether a dismissal of main proceedings against a joint tortfeasor on a procedural basis precludes a claim for contribution by another joint tortfeasor - STATUTORY INTERPRETATION - whether the imposition of the statutory obligation on an owners corporation under s 62 of the Strata Schemes Management Act 1996 amounts to "damage" - REFEREES - adoption of report

Law Reform (Miscellaneous Provisions) Act 1946 (NSW) LEGISLATION CITED : Strata Schemes Management Act 1996 (NSW) Trade Practices Act 1974 (Cth)

Brambles Constructions Pty Limited v Helmers (1966) 114 CLR 213 Christie v Purves [2007] NSWCA 182 Eko Investments Pty Limited v Austruc Constructions Limited & Ors; The Owners Strata Plan No. 64970 v Austruc Constructions Limited & Ors [2009] NSWSC 208 Eko Investments Pty Limited v Austruc Constructions Limited & Ors; The Owners Strata Plan No. 64970 v Austruc Constructions Limited & Ors (No. 2) [2009] NSWSC 329 CASES CITED : George Wimpey & Co Ltd v British Overseas Airways Corporation [1955] AC 169 Hart v Hall & Pickles Ltd [1969] 1 QB 405 James Hardie & Coy Pty Ltd v Seltsam Pty Limited [1998] HCA 78; (1998) 196 CLR 53 Kioa v West (1985) 159 CLR 550 Nicita v Owners of Strata Plan 64837 [2010] NSWSC 68 Seiwa Pty Ltd v Owners Strata Plan 35042 [2006] NSWSC 1157 The Owners Strata Plan No 64970 v Austruc Constructions Limited & Anor (No.3) [2010] NSWSC 60

The Owners Strata Plan No 64970 Austruc Constructions Limited PARTIES : Cyril Smith & Associates Pty Ltd Eko Investments Pty Limited Traditional Windows Pty Ltd

G A Sirtes SC (Corporation) M G Rudge SC/M White (Austruc) COUNSEL : I D Faulkner SC (CSA) M Galvin (EKO) S J Walsh (Traditional Windows)

David Le Page (Corporation) Doyles Construction Lawyers (Austruc) SOLICITORS : Kennedys (CSA) Stacks/Forster (EKO) James Tuite & Associates (Traditional Windows)

• 1 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION TECHNOLOGY & CONSTRUCTION LIST

55048/05 THE OWNERS STRATA PLAN NO 64970 v AUSTRUC CONSTRUCTIONS LIMITED & ANOR (No 4) JUDGMENT 1 This building case has been the subject of a number of judgments to which later reference is made. The expressions used in those previous judgments will be adopted in this judgment unless stated otherwise. The case was referred to the Referee on 2 November 2007. The reference hearing occurred between 1 April 2008 and 30 May 2008. The Report was provided to the Court on 26 June 2008 and after a further hearing before the Referee on 20 September 2008, the Second Report was provided to the Court on 24 September 2008. 2 The first adoption hearing took place on 16 and 17 February 2009. On that occasion the only party objecting to any parts of the Reports was CSA. All other parties sought the adoption of the Reports. CSA challenged the Report in relation to: (a) a finding of negligence against it in relation to the design of the building (design negligence); and (b) the Referee's failure to find that the Corporation's cases against it were statute barred. There was also a claim by CSA that it was denied procedural fairness in relation to the Contents Claim. 3 On 31 March 2009 judgment was delivered in respect of the first adoption hearing: Eko Investments Pty Limited v Austruc Constructions Limited & Ors; The Owners Strata Plan No 64970 v Austruc Constructions Limited & Ors [2009] NSWSC 208. CSA was successful in respect of its challenge to the finding of design negligence and unsuccessful in respect of its claim that the Referee had erred in failing to find that the Corporation's cases against it were statute barred. It was successful in respect of its claim that it had been denied procedural fairness in relation to the Contents Claim. The parties were advised to bring in Short Minutes of Order and also to deal with any directions that needed to take place in respect of the further consideration of the Contents Claim. Although the only parts of the Reports that were the subject of CSA's successful challenge were the design negligence claim against CSA and the Contents Claim against CSA, the parties did not attend to the filing of Short Minutes for the adoption of the other parts of the Report.

4 A further hearing took place on 27 April 2009. There was an argument as to whether certain aspects of the matter should be remitted to the Referee and judgment was reserved. On 30 April 2009 judgment was delivered in respect of the remittal of the matter to the Referee for further explanation in respect of the finding of design negligence and to give CSA an opportunity to be heard on the Contents Claim: Eko Investments Pty Limited v Austruc Constructions Limited & Ors; The Owners Strata Plan No. 64970 v Austruc Constructions Limited & Ors (No. 2) [2009] NSWSC 329 (the remittal judgment). 5 On 2 August 2009 the Referee provided a further report to the Court (the August 2009 Report). The adoption hearing in respect of the August 2009 Report took place on 21 October 2009 and judgment was reserved. On 22 January 2010 Austruc was placed into voluntary administration. The parties requested that the matter be restored to the list on 2 February 2010 and at that time the Court was advised of Austruc's administration. The administrators of Austruc sought an adjournment of the proceedings so that they could give consideration to the matter. The matter was adjourned by consent of all parties and listed for directions on 2 March 2010. Subsequent to that adjournment the parties were notified that it was intended to deliver judgment in respect of the matters litigated as between the Corporation and CSA in the second adoption hearing exclusive of matters involving cases brought by or against Austruc. That judgment was delivered on 18 February 2010: The Owners Strata Plan No 64970 v Austruc Constructions Limited & Anor (No 3) [2010] NSWSC 60 (the CSA judgment). In the CSA judgment the Referee's recommendation in the August 2009 Report that the Corporation's Contents Claim against CSA be rejected on the basis that CSA was prejudiced was adopted. That judgment also held that the part of the August 2009 Report in which the Referee gave an explanation in relation to his findings of design negligence should not be adopted. The judgment also dealt with and rejected a further limitation claim that CSA had raised. The practical effect of these findings is that CSA remained successful in its challenge to the Report in respect of design negligence (except for the design of the windows) and successfully resisted liability in respect of the Corporation's Contents Claim against it. 6 On 2 March 2010 when the matter was listed for directions the Court was advised that Austruc had been placed into liquidation on 26 February 2010. The Court was also advised that the liquidators, Brian Silvia and Andrew Cummins, submitted to the orders of the Court save as to any order that they as administrators or liquidators pay costs personally. CSA was granted leave to file a Notice of Motion in Court returnable on 18 March 2010 (CSA's Motion). That Motion was heard on 18 March 2010 when Mr I D Faulkner SC appeared for CSA and Mr F Hicks, of counsel, appeared for the Corporation. CSA's motion seeks a reconsideration of paragraphs [45]-[51] of the CSA judgment. It was submitted that there was a misunderstanding of CSA's limitation argument relating to s 62 of the Strata Schemes Management Act 1996 (NSW) (the Management Act) and that the Court has still not dealt with CSA's limitation defence based upon the fact that the Corporation suffered damage (i) by way of legal obligation to repair and (ii) by way of actual expenditure.

7 The remaining matters to be determined in the proceedings, apart from some applications for costs which are to be the subject of a separate hearing on 31 May 2010, are Austruc's claims and submissions raised at the second adoption hearing on 21 October 2009 in respect of which the administrators had sought the adjournment to 2 March 2010 and CSA's Motion. Austruc's Claims 8 As I have said, the determination of the claims and submissions made by Austruc in the second adoption hearing were deferred at the request of the administrators/liquidators of Austruc. Although these claims and submissions were made prior to the delivery of the CSA judgment they are to be considered in the light of that judgment. Contents Claim 9 The first claim by Austruc was that it was entitled to the benefit of the Referee's findings in the August 2009 Report in favour of CSA in respect of the Contents Claim. Austruc made no application at the first adoption hearing, nor before the Referee on the remitter, nor at the second adoption hearing, that it had been denied procedural fairness in respect of the Contents Claim. However it submitted that if the Contents Claim is dismissed against CSA it should also be dismissed against it. Austruc submitted that the Corporation made no submission at the first adoption hearing that the objection taken by CSA to the Contents Claim should apply only to CSA. Indeed Austruc submitted that the Court gave no intimation to the parties that it considered the objection being taken by CSA to work only to CSA's benefit. It was also submitted that the Court did not make any statement or orders to that effect in the judgment [2009] NSWSC 208. 10 These submissions are unsustainable. Paragraph [36] of the judgment [2009] NSWSC 208 noted that all parties sought the adoption of the Report and that the only challenges to the Report were made by CSA. Austruc was not denied procedural fairness and there is no proper basis on which it can justify a dismissal of the Contents Claim against it because CSA was denied procedural fairness. In its written submissions in the second adoption hearing Austruc sought a "re-confirmation from the Court" that the Contents Claim findings by the Referee in his earlier Reports were not adopted against Austruc. This submission is without foundation. There was no finding in the judgment that the Referee's recommendation that the Corporation's Contents Claim against Austruc was not to be adopted. The only challenges to the Referee's Reports were those to which I have already referred, otherwise it was intended that the Report be adopted. 11 The Referee's recommendations in his Reports (26 June 2008 and 24 September 2008) in relation to the Corporation's Contents Claim against Austruc are to be adopted.

Contribution Claim 12 Austruc submitted that in the event that it is found liable to the Corporation for the Contents Claim, it already has the benefit of a finding that CSA is liable to contribute to that liability: paragraph 332 of the Report and paragraph 39 of the second Report of 24 September 2008. Austruc submitted that CSA's liability for contribution is unaffected by the Referee's recommendation in the August 2009 Report that the Corporation's Contents Claim against CSA be rejected on the basis of the prejudice suffered by CSA.

13 The matter was remitted to the Referee for the purpose relevant to the Contents Claim of curing the procedural unfairness to CSA as a result of the Referee's failure to provide CSA with an opportunity to be heard on what has been described in the previous judgments as the "new issue". The CSA judgment adopted the Referee's recommendation to the Court that the Corporation's Contents Claim against CSA be dismissed albeit that the expression used by the Referee was "rejected" rather than dismissed. The reason that the Corporation's Contents Claim against CSA was dismissed was not because of the procedural unfairness by the Referee in failing to give CSA an opportunity to be heard, but because CSA had suffered irreparable prejudice by reason of the events referred to by the Referee in the August 2009 Report. The Referee reviewed the history of the Contents Claim and the way in which it was litigated before him and concluded that the prejudice suffered by CSA warranted the rejection of the claim. That part of the Referee's Report was adopted. 14 The CSA judgment did not deal with Austruc's contribution claim against CSA because determination of that aspect of the case was deferred when all parties consented to the adjournment of the matter on 2 February 2010. Austruc anticipated a finding that the Corporation's Contents Claim against CSA would be dismissed in accordance with the Referee's recommendation in the August 2009 Report and addressed its submissions accordingly.

15 The Referee considered Austruc's cross-claim against CSA for contribution in respect of its liability to the Corporation in relation to the Contents Claim. The paragraph of the Report that Austruc relied upon in support of its claim that the Referee had found that Austruc was entitled to recover contribution from CSA in respect of the Contents Claim was as follows: 332 The contents were damaged as a result of both poor design and poor workmanship, in each case relating both to the exterior protection system and the windows. The evidence does not enable the precise estimate as to the proportionate responsibility, but doing the best I can with the evidence, I apportion responsibility between Austruc, CSA and Traditional as follows: as between Austruc and CSA, 22.5% and 77.55 respectively; and as between Austruc and Traditional, 90% and 10% respectively. 16 Austruc also relied upon paragraph 39 of the Report of 24 September 2008 which was in the following terms: 39 On the first cross-claim, so far as that relates to Austruc's claim against CSA, Austruc should recover … 77.5% of the $237,440 awarded to the corporation against Austruc for contents, or $184,016. 17 Section 5(1)(c) of the Law Reform (Miscellaneous Provisions) Act 1946 (the Act) provides: (1) Where damage is suffered by any person as a result of a tort (whether a crime or not): … (c) any tort-feasor liable in respect of that damage may recover contribution from any other tort-feasor who is, or would if sued have been, liable in respect of the same damage, whether as a joint tort-feasor or otherwise, so, however, that no person shall be entitled to recover contribution under this section from any person entitled to be indemnified by that person in respect of the liability in respect of which the contribution is sought. 18 Austruc submitted that the logical conclusion from what was said in Brambles Constructions Pty Limited v Helmers (1966) 114 CLR 213 is that CSA cannot obtain an order dismissing Austruc's claim for contribution simply because the Court determines that the Corporation's Contents Claim against CSA fails on the basis of the prejudice referred to by the Referee. Brambles Constructions Pty Limited v Helmers was a case in which an injured employee recovered damages for personal injuries from his employer, Helmers. During the proceedings between the employee and Helmers, Helmers served a third party notice on Brambles claiming that it had caused or contributed to the damage in respect of which Helmers was being sued. Helmers claimed contribution from Brambles pursuant to s 5(1)(c) of the Act. At the time that Helmers was sued by the employee, less than six years had elapsed since the occurrence of the damage. However, at the date when Helmers gave the third party notice to Brambles, more than six years had elapsed from the date of the occurrence. Had the employee sued Brambles at the date the third party notice was given or any subsequent time and Brambles had pleaded the appropriate Statute of Limitations, Brambles would not have had judgment given against it in respect of the employee's claim. The case raised the question whether that circumstance afforded Brambles a good defence to the claim by Helmers for contribution. The High Court held that on its proper construction s 5(1)(c) of the Act did not make available to a defendant tortfeasor in an action for contribution any time limitation which would have been available in an action brought by the injured party. 19 In deciding this matter Barwick CJ said at 218: The House of Lords in George Wimpey & Co Ltd v British Overseas Airways Corporation [1955] AC 169 decided that a tort-feasor who had been sued by the injured party and had successfully defended the action, no matter on what ground , could not be required to pay any contribution to any other tort-feasor who suffered judgment at the hands of the injured party in respect of the same damage. He was neither a tort-feasor liable to pay damages nor a tort-feasor who had not been sued. [emphasis added] 20 George Wimpey & Co Ltd v British Overseas Airways Corporation [1955] AC 169 (the BOAC case) was a case in which an employee of BOAC who was injured in a collision between one of BOAC's vehicles and a vehicle owned by George Wimpey & Co (GW), brought an action against GW more than 12 months after the accident claiming damages as a result of GW's negligence. GW served a third party notice on BOAC claiming contribution under the equivalent English provision of s 5(1)(c) of the Act. At a later time the employee joined BOAC as the second defendant to the main claim. BOAC then pleaded, both in the main claim by the employee and in the contribution claim by GW, that the proceedings had not been commenced before the expiration of one year from the date on which the cause of action accrued.

21 The trial judge apportioned responsibility for damage as to one-third to BOAC and two-thirds to GW. Judgment was given for the employee against GW but the trial judge held that the employee's action against BOAC failed because it was statute barred. On the claim by GW against BOAC, the trial judge awarded contribution to GW as to one-third of the damages. On appeal the House of Lords (per Viscount Simonds, Lord Reid and Lord Tucker; Lord Porter and Lord Keith of Avonholm dissenting) held that GW was not entitled to recover contribution from BOAC because the relevant section did not allow a claim for contribution by one tortfeasor against another where that other tortfeasor had been sued by the injured person and found not liable. Lord Tucker said at 191: The construction which has prevailed below is that the sub-section draws a distinction between persons who have been sued and those who have not been sued. Contribution may be recovered against the former if they have been held liable in the suit, and against the latter if they would have been held liable had they been sued. There are two separate and exclusive categories. If an alleged tortfeasor comes into the first category his liability to make contribution will be conclusively determined by the result of the suit. If he is in the first category it is immaterial to speculate what his fate would or might have been if he had fallen in the second category. 22 After referring to the appellant's counsel's submissions that there was no impediment to bringing a person against whom contribution is claimed into the second limb of the relevant section notwithstanding that he has been sued and held not liable in the suit, Lord Tucker said at 192: My Lords, this seems to me to do violence to language which is tolerably plain - albeit inapt to cover a situation clearly never envisaged by those responsible for its enactment. It is to be remembered that this Act is giving to the claimant a new cause of action against the contributor which did not previously exist, and it would, in my view, require very clear language to lead to the conclusion that in addition to the categories consisting of (1) those sued and held liable, and (2) those not sued but who, if sued, would have been held liable, there is to be added a third class consisting of those who have been sued and held not liable but who may now be proved liable in further proceedings. 23 Viscount Simonds said at 178-179: The question then can be simply stated. Contribution is recoverable from one who in an actual suit by the injured man has been held liable by judgment: it is recoverable from one who, if sued, would in that hypothetical suit have been held liable. Is it also recoverable from one who has been actually sued by the injured man and held not liable? It happens in the case under appeal that the reason why the party from whom contribution was claimed was held not liable was because the Limitation Act was successfully pleaded. But this is irrelevant to the issue. The same question would arise if the claimant tortfeasor alleged that the defence, though it succeeded on the merits, was successful only because the case had been inadequately presented or even because the judge or jury had taken a wrong view of it. It appears to me that a construction leading to such a result should only be accepted if the language fairly admits of no other meaning. But, so far from being the case, in my opinion the sub-section plainly contemplates two classes only of persons from whom contribution can be claimed, viz.: those who have been sued and those who have not been sued but would, if sued, be held liable. If the intention had been to include a third class of persons who, having been already sued and found not liable, might yet in hypothetical proceedings be sued a second time and then found liable (an extravagant intention, as it appears to me, to impute to the legislature) I should have expected to find it expressed in clear and appropriate language. Not only is it not so expressed, but on the contrary I find in the words actually used the clear indication that the class of persons who "if sued would have been liable" does not include persons who, having been sued have been held not liable. 24 The words "no matter on what ground" used by Barwick CJ in Brambles Constructions Pty Limited v Helmers are not reflected or found in the BOAC case. Rather Viscount Simonds referred to success "on the merits". I am of the view that the BOAC case is not authority for the proposition that a joint tortfeasor may resist liability for contribution if it has achieved success in the main claim "no matter on what ground", but rather if it has achieved success after a hearing on the merits "no matter on what ground." I am of the view that Barwick CJ's use of the expression "no matter on what ground" should be so understood.

25 In Hart v Hall & Pickles Ltd [1969] 1 QB 405 Lord Denning referred to the BOAC case and to the relevant section of the Limitation Act and said at 410-411 (footnotes omitted): Those words, as construed by the House of Lords, cover two situations: (1) where a tortfeasor has been sued and has been held liable; and (2) where a tortfeasor has not been sued, but, if he had been sued, he would have been held liable. The words do not cover a third situation: (3) where a person who is alleged to be a tortfeasor has been sued and has been held not liable. If he has been held not liable on the merits of the case, clearly he cannot be sued for contribution. If he has been saved from liability by reason of the Statute of Limitations, again he cannot be sued for contribution: see George Wimpey & Co Ltd v BOAC . But here we have a fourth situation: (4) where a person (who is alleged to be a tortfeasor) has been sued but the action has been dismissed against him for want of prosecution. Does this relieve him of any liability to make contribution?

It seems to me that, in order that a person should be exempted from contribution, he must have been "sued to judgment" and found to be not liable. Those words "sued to judgment" were used by Parker J in Littlewood v George Wimpey & Co Ltd and BOAC and BOAC (Third Party) and were adopted by Morris LJ in the same case. When an action has been dismissed for want of prosecution, the defendant has not been "sued to judgment" at all. There has been no finding on the merits. There has been no judgment that the defendant is not liable. It is only an interlocutory order - a matter of procedure - which does not affect substantive rights. It is not a final decision. It does not give rise to an estoppel by res judicata. The plaintiff can start another action for the same cause, so long as he does so within the period allowed by the Statute of Limitations: see Magnus v National Bank of Scotland and Pople v Evans . Seeing that it is only a procedural matter, I hold that the defendant is not exempted by reason of the action being dismissed for want of prosecution. He is still liable to make contribution if he is a person who "would, if sued, have been liable, in respect of the same damage". 26 James Hardie & Coy Pty Ltd v Seltsam Pty Limited [1998] HCA 78; (1998) 196 CLR 53 was a case in which the injured plaintiff sued three defendants in the Dust Diseases Tribunal. The first defendant cross-claimed against the third defendant and the third defendant cross-claimed against the first and second defendants. Consent judgment was entered for the plaintiff against the first and second defendants and judgment was entered in favour of the third defendant. Before judgment was pronounced, counsel for the first defendant indicated that his client did not consent to judgment being entered for the third defendant on the main claim but expressed the view that he was not entitled to be heard further in relation to that matter. Counsel for the first defendant also submitted that entry of the judgment in favour of the third defendant on the main claim could not affect the first defendant's claim for contribution against the third defendant. The Judge agreed and indicated that he would hear the cross-claim in respect of contribution at a later time. Before that matter came on for hearing the third defendant obtained an order striking out the first defendant's claim for contribution. 27 Gaudron and Gummow JJ said at 66-67: The claimant tortfeasor who satisfies the condition precedent may recover contribution from those other tortfeasors who bear responsibility in respect of the same damage in a fashion which answers a description in the balance of paragraph (c). The defendant tortfeasor must be one (i) "who is … liable in respect of the same damage" or (ii) "would if sued have been, liable in respect of the same damage". Only those who satisfy (i) or (ii) are amenable to a claim for contribution under the statute. Further, those who have been sued to judgement, whatever its outcome, do not fall within (ii). That is the effect of settled authority in this Court. 28 Gaudron and Gummow JJ then referred to Barwick CJ's statement in Brambles Constructions Pty Limited v Helmers referred to above and said at 68, [38] (footnotes omitted): In Hart v Hall & Pickles Ltd , the English Court of Appeal held that, where the action by the victim of the tort against the defendant in the contribution proceeding has been dismissed for want of prosecution, that person answers the description of one who "would if sued have been, liable in respect of the same damage". This was because the phrase "if sued" was rendered inapplicable only if the tortfeasor in question had been sued to judgment and the dismissal for want of prosecution was but an interlocutory order. 29 Callinan J said at 96: Lord Denning MR, although he said that there had been no judgment on the merits, added that the joint tortfeasor had "not been sued to judgment". His Lordship also referred to the interlocutory and non-substantive nature of a dismissal for want of prosecution which does not bar a further action based on the same facts. 30 Kirby J, in dissent, said at 79-80 and 85-86 (footnotes omitted): 70. The parallels between Hart and the present case, although not exact, are striking. Here too the person alleged to be a co-tortfeasor has been sued. Here too that action has been dismissed. The only difference is that here the action was dismissed not for want of prosecution by the plaintiff but by reason of a consent judgment between the plaintiff and the target tortfeasor to which the claimant tortfeasor, held liable, was not a party. In common with the present case and the situation in Hart there has been no holding of liability "on the merits of the case", a requirement thought necessary to secure the immunity in Lord Denning's third situation. … 71. Both the appellant and the respondent sought to derive support from Hart's case. The appellant laid emphasis upon the repeated references to the need for an action "to judgment" and a "finding on the merits" to warrant extinguishing the claimant tortfeasor's statutory right to contribution. The appellant also used the case to illustrate its argument that the statutory language was not narrowly confined. It had to be given meaning in a variety of circumstances. It invoked a true hypothetical suit, the outcome of which determined whether there would be recovery or not. On the other hand, the respondent argued that it had indeed been "sued to judgment" and that the judgment against it was not interlocutory but affected substantive rights as between it and the plaintiff so as to foreclose the preconditions necessary to the appellant's statutory claim for contribution. The Court below preferred the latter approach. But should we? … 84. The words "would if sued have been" in par (c) therefore envisage a completed action where the target tortfeasor has been sued to judgment and the action has been fully dealt with on its merits. Lord Denning suggested this construction of the paragraph in Hart . Windeyer J implied as much in Brambles when he said: "The description, a tort-feasor who if sued would have been liable, denotes any person who would have been held liable in tort had he been sued in a competent court, by proper process, at a proper time and on evidence properly presented - that is anyone whose liability as a tortfeasor could have been ascertained in an action." 85. Clearly, in the context, the ascertainment of liability means ascertainment on its merits, …

31 In the present case CSA was sued by the injured party, the Corporation, in respect of the Contents Claim and successfully defended itself against that claim on the basis that it was prejudiced. This finding and the consequent dismissal of the Corporation's Contents Claim against CSA was not a finding or dismissal "on the merits". It was a finding that by reason of the "sequence of events" in the way the Corporation litigated its Contents Claim against CSA before the Referee, CSA had suffered prejudice that was irreparable. The prejudice was that CSA had been placed in an unfair forensic position. Although the Referee analysed the possibility of remedying the prejudice, he concluded that it would have been "insufficient". That is appropriately characterised as a finding of procedural unfairness and not a finding on the merits: Kioa v West (1985) 159 CLR 550 per Brennan J at 622. 32 By reason of the peculiar procedural history of this matter the Referee had considered the Corporation's Contents Claim against CSA "on the merits" and but for the finding in the August 2009 Report the Referee would have maintained the recommendation to the Court to find in favour of the Corporation on that claim. However the fact that this process took place does not mean that Austruc is precluded from seeking contribution from CSA. CSA was not sued to judgment on the merits. The findings of the Referee in his original Report in respect of the Corporation's Contents Claim against CSA were not adopted. The findings in the August 2009 Report were adopted and CSA was successful on a procedural basis and not on the merits of the case. In those circumstances Austruc is entitled to claim that CSA is a joint tortfeasor who, if sued, would have been liable for the same damage. 33 I am satisfied that Austruc is entitled to an order that CSA contribute 77.55% of the $237,440, or $184,016, awarded to the Corporation against Austruc for the Contents Claim.

Fall Back Position 34 Austruc claims that where its own breach of duty to the Corporation has been brought about by reliance on CSA's instructions, in circumstances where CSA knew that Austruc was relying on those instructions in undertaking the work, CSA owed to Austruc a duty of care in giving the instructions to it. There is no issue that CSA had an obligation to inspect the works at important times and where necessary to ensure compliance with contractual specifications or the design. 35 Austruc submitted it was vulnerable for defects that resulted from instructions given by CSA without any ability to protect itself. Austruc accepted that it may be exposed to liability for its own bad workmanship, but submitted that it should not be exposed to liability for its work which resulted from a failure by CSA to ensure the type of work undertaken was sufficient to render the design efficient.

36 The Referee did not address Austruc's "fall back" position. On the second adoption hearing the only evidence in support of this position tendered by Austruc was its written submissions before the Referee (Ex 1 on the Motion). There was no evidence tendered to prove some of the essential features of what Austruc claims to be the case that it now seeks to have the Court determine. Austruc claims that its own breach and consequential liability to the Corporation was brought about by reliance on CSA's designs and instructions and in circumstances where CSA knew that Austruc was relying on those designs and instructions in undertaking the work. There was a further submission that Austruc is vulnerable where CSA had contracts directly with the developer because Austruc could not negotiate terms in its own contract to cast a burden of economic loss due to design negligence on the architect. 37 It would have been necessary for Austruc to run its case before the Court in this regard because the Referee did not report to the Court on this matter. This was not done. There should have been evidence of the particular circumstances that Austruc claims amounted to the instructions given to it by CSA, and of the particular circumstances of alleged reliance on those instructions, to show the necessary causal connection to warrant a finding that Austruc's own breach of duty to the Corporation had been brought about by reliance on CSA's instructions. It would also have been necessary to call evidence to prove that CSA knew that Austruc was relying on those instructions in undertaking the work. No such evidence was called. Accordingly it is inappropriate to seek a ruling from the Court. Austruc's so called "fall back" position fails. Trade Practices Claim 38 In written submissions before the Referee Austruc claimed that if CSA did not owe a duty of care to the Corporation, leaving Austruc exposed to the full liability for the defects in the façade, the Referee was asked to consider alleged contraventions of the Trade Practices Act 1974 (Cth) by Austruc. The Referee did not deal with these claims because he held that CSA did owe a duty of care to the Corporation. However the Court has now rejected that part of the Referee's Report. Austruc submitted that in so far as it is held liable to the Corporation, such liability resulted from the implied representation of CSA that if it built the Building in accordance with the plans, specifications, drawings and instructions, it would result in a building which would comply with the design, specifications and Building Code and would not expose Austruc to the Corporation. 39 Once again as with the duty of care argument Austruc has not led any evidence before the Court to establish a breach of s 52 of the Trade Practices Act. There is no evidence to demonstrate that the representation, even if implied, was misleading or deceptive. The Referee's Report concluded that Austruc rendered over the control joints and this was a major cause of the cracking of the façade and the water ingress. It would appear from the Referee's Reports that had Austruc complied with the specifications, drawings and design of the building it would not have been exposed to the Corporation, because more probably than not the façade would have been watertight. It is a matter that has not been the subject of the Referee's Report and accordingly it is not properly the subject of this application for adoption or rejection of the August 2009 Report. As I apprehend what was said on 2 March 2010, the liquidators of Austruc do not wish to pursue these claims any further.

CSA's Motion 40 Mr Faulkner has complained that a submission that he has been propounding on behalf of CSA on a number of occasions, both before the Referee and before the Court, has been overlooked or misunderstood. In support of this complaint Mr Faulkner has referred to numerous previous submissions, both oral and written. It would be unhelpful to refer to those submissions in any detail because they are wide ranging and in parts quite inconsistent with the present application. 41 Paragraphs [48] and [50] of the CSA judgment held that the success of CSA's limitation argument depended upon the "defect" being manifest as at 8 February 2002 and that the "underspecfication" of the windows was not manifest or reasonably discoverable by that date. CSA submitted that the concept of manifestation of damage has nothing to do with the particular submission that it raises. There have been competing submissions by the Corporation and CSA as to whether there should be a reconsideration of the submission put by CSA, however I am of the view that the most efficient way to deal with the matter is to consider Mr Faulkner's submissions on the basis that they have not been specifically dealt with by the Referee or the Court, notwithstanding that limitation arguments were dealt with in the judgment delivered on 31 March 2009 [2009] NSWSC 208 and in the CSA judgment.

42 The present argument is contained in the written submissions in support of the present application as follows: 2 CSA's defence as dealt with earlier in written and oral submissions both before the referee and the Court, is that damage in the nature of expenditure and the incurring of legal obligation arose as follows: (a) The agreed date for determining whether proceedings were statute barred is 8 February 2002 - this being 6 years prior to the joinder of CSA (judgment [2009] NSWSC 208 at [3]). (b) Section 62 of the Act casts a positive (strict) duty on an owners corporation to maintain and keep in good repair the common property. And the duty extends to being proactive and instituting an inspection regime to keep the common property in good repair, by acts of maintenance, before it falls out of condition: Siewa Australia Pty Limited v Owners Strata Plan 35042 [2006] NSWSC 1157; Trevallyn-Jones v Owners Strata Plan 50358 [2009] NSWSC 694; Nicita v Owners Strata Plan 64837 [2010] NSWSC 68.

The incurring of this obligation, both in respect of the stainless steel structure and the windows, was an incurring of a liability which amounted to damage; Christie v Purves [2007] NSWCA 182; Winnote Pty Limited v Page (2008) 68 NSWLR 531.

(c) Further, the services provided by Mr Quested from November 2001 and the monies paid to him from November 2001 by the owners corporation in consequence (see CSA's summary of water ingress evidence dated 16 February 2009 - marked exhibit C during the first adoption hearing), confirms the incurring of a liability, and that damage was suffered, by the owners corporation from at least November 2001. This was direct economic loss by the payment of money and the obligation to pay further money: Christie v Purves [2007] NSWCA 182; Winnote Pty Limited v Page (2008) 68 NSWLR 531. In this respect, ignorance of the fact that a person or entity had suffered loss, or could suffer loss, is irrelevant: Christie v Purves [2007] NSWCA 182 at [36]-[40]. 43 In the submissions made on 21 October 2009 Mr Faulkner relied in particular upon paragraphs [4] and [5] of Brereton J's judgment in Siewa Pty Ltd v Owners Strata Plan 35042 [2006] NSWSC 1157 in which his Honour said: 4 The duty to maintain involves an obligation to keep the thing in proper order by acts of maintenance before it falls out of condition, in a state which enables it to serve the purpose for which it exists [ Hamilton v National Coal Board [1960] AC 633, 647 (Lord Keith of Avonholm); Haydon v Kent County Council [1978] QB 433, 464 (Shaw LJ); Ridis v Strata Plan 10308 [2005] NSWCA 246, [161]]. Thus the body corporate is obliged not only to attend to cases where there is a malfunction, but also to take preventative measures to ensure that there not be a malfunction [ Greetings Oxford Koala Hotel Pty Ltd v Oxford Square Investments Pty Limited (1989) 18 NSWLR 33 (Young J); Ridis, [162]-[163]]. The duty extends to require remediation of defects in the original construction of the common property [ Proprietors Strata Plan No. 6522 v Furney [1976] 1 NSWLR 412, 416 (Needham J); Ridis [164]-[165]]. And it extends to oblige the owners corporation to do things which could not be for the benefit of the proprietors as a whole or even a majority of them [ Proprietors Strata Plan 159 v Blake (1986) CCH Strata Titles Cases ¶30-068 (Yeldham J); Ridis , [166]].

5 It follows that as soon as something in the common property is no longer operating effectively or at all, or has fallen into disrepair, there has been a breach of the s 62 duty [cf Ridis [177]]. Insofar as Ridis held that s 62 did not oblige an owners corporation to conduct or procure the conduct of an expert assessment of every possible source of danger in the common property, personal property vested in it, and fixtures and fittings comprised in the common property, that was in the context of a submission that by imposing the statutory duty to maintain and repair, s 62 had the ancillary effect of extending the common law duty of care of an owners corporation as an occupier of the common property to include rigorous duties of inspection. The Court of Appeal rejected the submission that s 62 expressly or implicitly resulted in the imposition of such a common law duty. But that is beside the point; in this case, unlike in Ridis , the plaintiff relies on a statutory cause of action said to arise on s 62, rather than a duty of care said to arise consequentially from s 62 [cf Ridis , [87]-[88]]. 44 Mr Faulkner also relied upon Nicita v Owners of Strata Plan 64837 [2010] NSWSC 68, a case in which Bryson AJ referred, at [13], to the well established principle that s 62 creates a duty owed to each lot-owner, breach of which gives rise to a private cause of action for damages for breach of statutory duty. Reliance was also placed on Christie v Purves [2007] NSWCA 182, in particular on paragraph [59] which was in the following terms: 59 Finally, as regards the claim based on the confusion and disorder in Mr Christie's tax records, that loss was incurred no later than the time by which Mr Purves had brought those records into such a state that, reasonably, an independent review of those records was required by another accountant. At that date, the state of Mr Christie's affairs required him to incur the expense of putting them into good order. It was at that time that his loss was incurred. His loss was not incurred when Mr Mercer eventually sent him an invoice for his fees for his work in putting his tax records in order.

45 Mr Faulkner's propositions are: (1) s 62 casts a positive (strict) duty on an owners corporation to maintain and keep in good repair the common property; (2) the duty extends to being proactive and instituting an inspection regime to keep the common property in good repair, by acts of maintenance, before it falls out of condition; and (3) the incurring of this obligation, both in respect of the stainless steel structure and the windows, was an incurring of a liability which amounted to "damage". 46 The first two of those propositions are not controversial. There is some difficulty with the third proposition. Mr Faulkner has submitted on a number of occasions that "the incurring of an obligation to repair under s 62 of the Management Act and the incurring of a liability to do so constitutes damage" (Outline of Reply 23 April 2009, paragraph 20; written submissions 20 October 2009, paragraph 16). Mr Faulkner has also submitted on a number of occasions that the approach of the Court in dealing with these submissions by referring to the manifestation of defects "misunderstands" or "entirely misses the point" (oral submissions 21 October 2009). 47 The "point" presently argued seems to be that as soon as the water gained entry into the common property the Corporation had a duty under s 62 to repair the property pursuant to its obligation to keep the common property in a state of good repair. CSA claims that the date on which that ingress occurred was the date the Corporation sustained damage by reason of its statutory obligation under s 62 irrespective of the cause of the ingress of water. It is submitted that time commences to run against a tortfeasor from that date irrespective of the Corporation's capacity to identify the cause of the ingress of water. It was submitted that the ingress of water occurred before 8 February 2002 and therefore any cause of action against CSA would be statute barred as would Austruc's Cross-Claim against CSA for contribution. 48 Mr Hicks, counsel for the Corporation, submitted that the statutory obligation of the Corporation under s 62(1) is owed to the proprietors of the lots, for whom the Corporation holds the common property, and requires the Corporation to "properly maintain and keep in a state of good and serviceable repair the common property". It was submitted that the obligation generally arises immediately upon the registration of the Strata Plan. However, it cannot be relied upon by negligent tortfeasors where a defect remains latent. 49 It was submitted that a particular incident of the general obligation to undertake repair of physical damage arises in the particular circumstances and as such, there are two logical positions: (1) where the general obligation is concerned, it is statutory and independent of any act or omission of any tortfeasor - the existence of such a general statutory obligation exists whether or not there is any act or omission on the part of any tortfeasor that could found a claim and cannot relevantly be a "liability", "loss" or "damage" for the purposes of any cause of action against the negligent tortfeasor; and (2) if the general obligation gives rise to a specific incident whereby the Corporation is required to attend to rectification of physical damage, the "liability", "loss" or "damage" arises in the particular circumstances of breach by the negligent tortfeasor and the consequent defect, such that the line of authority already referred to in the judgment delivered on 31 March 2009 [2009] NSWSC 208 and in the CSA judgment applies.

50 CSA's submissions included a claim that the Corporation has an obligation to be proactive to put in place an inspection regime to comply with its obligations under s 62. If Mr Faulkner's submissions that the imposition of an obligation such as this amounts to "damage", such "damage" would be incurred at the time that the Strata Plan was registered because from that date the Corporation had the obligation imposed on it to implement a proactive regime to ensure that the common property was kept in a good and serviceable state of repair. That process would include the incurring of costs and expenses just as the process of mopping up the water incurred an expense to Mr Quested. The imposition of the statutory obligation is not properly characterised as "damage" for the purpose of assessing whether a claim against a negligent tortfeasor is statute barred. I am satisfied that the legislature did not intend that the Corporation that complies with its obligations under s 62, in this case mopping up the water, would be precluded from pursing a negligent tortfeasor in relation to a latent defect. 51 Although Mr Faulkner has complained that both the Referee and the Court have failed to understand and to deal with the point that he raises, it seems to me that the point is misconceived. 52 I am not satisfied that the imposition of a statutory obligation on the Corporation amounts to "damage" as submitted. What has been said in the previous judgments in relation to the need to identify the cause of the ingress, that is, when the defect was manifest, is the appropriate way in which to assess whether the cause of action is statute barred. The "liability", "loss" or "damage" arises in the particular circumstances of breach by the negligent tortfeasor.

53 CSA's submissions in respect of this aspect of its limitation argument are rejected. Conclusion 54 The Reports of the Referee dated 26 June 2008 and 24 September 2008 are to be adopted except for those parts that have been previously rejected or the subject of settlement between the parties. 55 The parties are to file Short Minutes of Order with my Associate by no later than 30 April 2010. The matter is listed for costs arguments on 31 May 2010. I grant liberty to restore on one day's notice.

27/04/2010 - Typographical error - Paragraph(s) 32

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