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

Supreme Court of NSW|2010-05-31|Before: Bergin CJ

CITATION : The Owners Strata Plan No. 64970 v Austruc Constructions Limited & Anor (No. 5) [2010] NSWSC 568

DECISION : Judgment entered. Costs orders made.

CATCHWORDS : ORDERS - final orders in lengthy reference process - whether judgment should be entered on cross-claim for contribution - COSTS - numerous events in respect of which costs should follow - apportionment of costs in the circumstances

The Owners Strata Plan No. 64970 (Plaintiff) PARTIES : Austruc Constructions Limited (in liquidation) (First Defendant) Cyril Smith & Associates Pty Ltd (Second Defendant) Slater Lomas Pty Ltd (Third Cross-Defendant to First and Second Cross-Claims)

G A Sirtes SC (Corporation) COUNSEL : A Carney (Solicitor) (Austruc in liquidation) I D Faulkner SC (CSA) I G Roberts (Slater Lomas)

David Le Page (Corporation) SOLICITORS : Carneys Lawyers (Austruc in liquidation) Kennedys (CSA) DLA Phillips Fox (Slater Lomas)

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

2005/270978 THE OWNERS STRATA PLAN NO 64970 v AUSTRUC CONSTRUCTIONS LIMITED & ANOR (NO. 5) JUDGMENT - EX TEMPORE 1 I have made final orders this morning reflecting the reasons in The Owners Strata Plan No. 64970 v Austruc Constructions Limited & Anor (No. 4) [2010] NSWSC 212. There are three issues that remain for decision. The first is the amount of the judgment to be entered in the plaintiff's favour against the second defendant, CSA. The competing arguments relate specifically to an amount for the scaffolding and hoists (scaffolding). The plaintiff claims that it is entitled to a figure of $197,822 for scaffolding. CSA claims that it is unfair to it to allow that amount having regard to the outcome in the proceedings. 2 The Further Report of the Referee of 24 September 2008 included the following: 4 (1) Duration : Messrs Radcliffe and Doherty considered that 12 weeks was required for the carrying out of the remedial work, whereas Mr Fisher considered that 15 weeks was needed, having regard to the prospect that unforeseen items were likely to require work. Messrs Radcliffe and Doherty in effect responded by saying that the three witnesses had already made an allowance of 27.25% that included an appropriate provision for contingencies. However, Mr Fisher considered that an additional allowance should be made. In effect Mr Radcliffe considered that to be "double dipping". In submissions, the corporation emphasized the imprecision necessarily involved in the estimates of the work to be performed, and spoke of the need for a buffer. However, this appears to have already been allowed for in the agreed uplift of 27.25% for items that include contingencies. I accept the view of Mr Radcliffe, supported as it is by Mr Doherty.

7 (3) Scaffolding : Mr Doherty took a figure of $56 per square metre, Mr Fisher adopted the rates published in Rawlinson's Handbook, and Mr Radcliffe took a figure from a quotation provided for this particular site by Waco Kwikform Ltd, described as a national company with a local office. The corporation urged acceptance of Mr Fisher's figures, submitting that they were more likely to be reliable, and pointed out that the Waco Kwikform quotation had been given in 2004, and that it was expressed to be subject to a site inspection. However, Mr Radcliffe adjusted the 2004 figures for inflation to 2008, the quotation was expressed to have been based on a drawing, and the site is unremarkable. Viewing the matter overall, Mr Radcliffe's approach seems to me to be more likely to provide an accurate assessment of the cost to be incurred on this job than the other two generic approaches.

8 (4) Hoisting : Mr Fisher provided for separate hoists for materials and workers, whilst Messrs Doherty and Radcliffe provided only for a goods hoist, but for there to also be a ladder built into the scaffolding. The only real reasoning appears from the evidence of Mr Radcliffe, and I accept his view as to this: he described other kinds of jobs, akin to this one, where what he proposes proved satisfactory.

9 In summary, I accept the figure of $297,402 being the figure propounded by Mr Radcliffe on the basis that the work in question can be completed in 12 weeks, and in the way he describes.

Question 2: What is the apportionment of the scaffolding, contingency fees, profit, overheads, design and preliminaries amongst the defendants and cross defendants?

10 Mr Doherty reported that these items should be apportioned on a pro rata basis, but it appears that he was only dealing with the position as between Austruc and CSA. Mr Radcliffe went further and dealt with the other cross-claims. He said that work I will generally and briefly describe as "Preliminaries" should be apportioned amongst all the defendants and cross-defendants on a pro rata basis, but that the balance of the items under consideration, that is those relating to the costs to be incurred in providing scaffolding and hoisting, should be apportioned only between those parties whose breaches of obligation had resulted in the need to provide now for scaffolding and hoisting - that is, the deficiencies concerning the façade, and the windows. All the other remedial work can be carried out without providing for these.

11 I accept Mr Radcliffe's proposal as correct, subject to one qualification: he apportioned the costs on the assumption that all the parties would be solvent, and would pay their appropriate fragments of the total damages. For the reasons set out below, when dealing with question 6, I consider that the judgment given on each cross-claim should be formulated on the basis that there is solidary liability.

Question 4: The quantum of the rectification of the windows.

15 It is now agreed that the cost will be $43,447, and that an allowance must also be made for Preliminaries, scaffolding and hoisting. 3 The amount of $297,402 in paragraph 9 was made up of $99,580 for Preliminaries and $197,822 for scaffolding. 4 The plaintiff seeks judgment in the amount of $385,312 which includes $197,822 for scaffolding. CSA submits that the appropriate figure is $150,804.18, which includes $30,286.55 for scaffolding. CSA submits that the pro rata approach referred to by the Referee in paragraph 10 above is an appropriate one particularly having regard to the reference to an "allowance" made in paragraph 15. It was submitted that this supports the approach that CSA has adopted in identifying its liability for the windows in the amount of $43,347 and expressing that as a percentage of the overall liability at 15.31%. That percentage has then been applied to the figure of $197,822 to reach the figure of $30,286.55. 5 Mr Sirtes SC, for the Corporation, submits that, as can be seen from paragraph 4 of the Further Report, a period of 12 weeks would be required to carry out the remedial work. Mr Sirtes submitted that it may well be that the other rectification work will not occur because of the financial demise of Austruc. There is no evidence before me to establish that this is the case and I must assume that the remedial work will occur and the windows will be, as Mr Faulkner SC put it, a following trade. It does not seem to me to be fair to require CSA to pay the whole of the costs of scaffolding when its work is limited to the windows. I am satisfied that it is just and fair to adopt a pro rata approach, but I am of the view that I should allow something for the duration the scaffolding will be in place. 6 The scaffolding will have to be in place for the windows and, of course, for the rectification of the façade. If one were to apply the mathematical equation that has been provided by Mr Faulkner, one reaches a figure for the judgment amount of $150,804.18. It seems to me that I should allow a greater figure than $30,286.55 towards the scaffolding. On the evidence before me in this application, I am satisfied that I should apportion it across a period of what might be less than 12 weeks, taking into account the pro rata equation that Mr Faulkner has provided. I am satisfied that the figure should be increased by $20,000. 7 Accordingly, the judgment amount will be $170,804.18. I have adjusted order 4 in the Short Minutes of Order to reflect that amount. I make the order in paragraph 4 of the Short Minutes of Order initialled by me and dated today. 8 That brings me to the next issue remaining for determination as to whether I should enter judgment on the cross-claims or merely a "verdict". The draft orders in this regard are contained in paragraphs 4 and 5 of the Short Minutes of Order initialled by me and dated today and marked "A". 9 The short point is raised by reference to the recent decision of the Court of Appeal in Hanson Construction Materials Pty Limited v Tawhai [2010] NSWCA 55. That was a case involving a motor vehicle accident with the plaintiff suing a number of defendants and there being claims for contribution. Although there was no appeal ground in respect of the specific orders made by the trial Judge to which this point goes, Hodgson JA said: [75] As regards the form of the orders, in my opinion there should not be judgments for money sums on the cross-claim, because the cross-claimants are not entitled to judgments unless and until they have actually paid the plaintiff. The method that has been adopted in the past has been to give verdicts but not judgments on the cross-claims: Roads and Traffic Authority (NSW) v Turner [2008] NSWCA 48 at [38], Andrews v Nominal Defendant (1962) 63 SR(NSW) 110 at 119-120. It is true, as pointed out by Basten JA, that the term "verdict" is most commonly applied to a jury verdict; but the Uniform Civil Procedure Rules do not limit the use of that term to jury verdicts. See in particular the definition of "verdict" in UCPR 51.2, and also UCPR 51.18(1)(f). An alternative would be to make an appropriate declaration, but I think it is reasonable to continue to follow the procedure used in Andrews and Turner .

10 In dissent, Basten JA said: [81] The qualification concerns a purely technical matter. At [75] his Honour has suggested that the orders on the cross-claims, which cannot at this stage constitute judgments for specified sums of money, should be described as "verdicts". I do not understand the distinction sought to be drawn in relation to the orders made in a trial by a judge alone or, on a rehearing, by this Court. The distinction operates where there is a jury, as was the case in Andrews v Nominal Defendant (1962) 63 SR (NSW) 110. The approach adopted there appears to have been carried over into Roads and Traffic Authority of NSW v Turner [2008] NSWCA 48. (No doubt there are other illustrations of the same practice.) However, the practice does not reflect the language of the Uniform Civil Procedure Rules 2005 (NSW), Pt 36. Nor does the purported distinction carry any self-evident consequence, in circumstances where the "judgment or order" will take effect either on the date on which it is given or made, or when it is entered, which, under the "computerised court record system" is usually the same date: UCPR rr 36.4 and 36.11. 11 Mr Faulkner submitted that to the extent that any contribution is to be paid, Austruc is not entitled to judgment unless and until it has actually paid the plaintiff, and it would be appropriate to enter a verdict rather than a judgment. 12 Mr Carney, solicitor on behalf of the liquidator of Austruc, submitted that Hodgson JA's comments were obiter, and if not obiter, that they were wrong. Where parties seek to conduct litigation, consistently with the overriding purpose of the rules of this Court and actions are brought at the one time for contribution, it seems to me inappropriate then to have what has been described as technical arguments (see Basten JA at [81]) in relation to the orders to be made. 13 Mr Carney has submitted that, although he has been unable to find authority on all fours with the present case where a joint tort-feasor (in this case Austruc) is in liquidation and a solvent party (in this case the Corporation) has been successful against it in the main claim and the joint tortfeasor (Austruc) has been successful against a solvent party (in this case CSA) for contribution, judgment should be entered in Austruc's favour. The alternative of having judgment entered but stayed was raised with counsel during argument. If a verdict is entered and the parties await the process of liquidation and a report as to what might be available to pay the plaintiff's judgment debt, there would be further costs incurred in the process of coming back to the Court yet again to have the judgment entered when Austruc has paid whatever amount available to the plaintiff. 14 This litigation has been going for years. The history of this case would be difficult to replicate in any other case, one would hope. It has, as I have said, taken years for it to come to this conclusion by reason of a number of features, some of which were certainly not the parties' fault. The case is to be finalised today on a basis, as best I can, to enable the parties to take whatever next step they wish in this litigation, either by filing a proof of debt in the liquidation or, alternatively, taking other steps. If it is correct that Austruc is not entitled to enforce a judgment on the contribution claim against CSA and if it attempts to enforce that judgment, CSA will resist it on the basis that Austruc is not entitled to enforce it until it has paid the relevant amount to the plaintiff. That will be a matter for decision at a later time should that issue arise. I am of the view that Hodgson JA's comments were obiter. It is also the case that Hanson and the cases cited by Hodgson JA are distinguishable on their facts.

15 I regard it as appropriate to enter judgment on the cross-claims and let the law do its work in respect of the timing of the enforceability of those judgments. Accordingly, I intend to change the wording in the Short Minutes of Order marked "A" to delete the words "verdict or declaration" in paragraph 4 and insert in their place the word "judgment" and to delete the words "verdict or declaration" in paragraph 5(a) and insert in their place the word "judgment". I make the orders in paragraphs 4 and 5 of the Short Minutes of Order initialled by me and dated today and marked "A". 16 That leaves the final issue for determination, the costs as between the plaintiff and CSA. The plaintiff seeks an order that CSA pay its costs of the proceedings, that is from the commencement of the proceedings to date, as agreed or assessed, excluding costs of the first and second adoption hearings. CSA seeks an order that the plaintiff pay 90% of its costs of the proceedings to date. 17 As can be seen from the orders made today, the plaintiff succeeded against CSA by the entry of judgment in the amount of $170,804.18. The history to the litigation as at the first adoption hearing is contained in paragraphs [3] to [5] of the judgment delivered on 31 March 2009: Eko Investments Pty Limited v Austruc Constructions Limited & Ors; The Owners Strata Plan No 64970 v Austruc Constructions Limited & Ors [2009] NSWSC 208. The claim against CSA involved determining whether it was negligent in the design of the Building which allowed water to penetrate through the external protection system. The second aspect of the claim involved the water penetration through the windows or their surrounds. At the first adoption hearing on 16 and 17 February 2009, CSA did not challenge the Referee's finding that it was negligent in relation to the design of the windows. What was challenged was whether the Referee's findings, properly understood, amounted to a finding of design negligence as opposed to a finding of poor workmanship or failure to administer the contract. The issue relating to the duty of care focused on whether the plaintiff was vulnerable in respect of the façade. There was a great deal of time taken up at the adoption hearings in respect of the Referee's reasoning in relation to the conclusions he reached that CSA was negligent in failing to design a building that was water-tight. 18 It is true that CSA was already being sued in the Eko proceedings however, I am considering the costs as between the plaintiff and CSA once CSA was joined to these proceedings and sued in negligence. If the plaintiff had not pursued its claim in respect of maintaining the findings of negligence against CSA in respect of the façade, the costs incurred up to the end of the reference hearing in that regard could have been contained. But CSA was forced to fight on to achieve a rejection of the finding of its negligence for the main claim made against it. 19 Although Mr Sirtes, in his usual cogent fashion, has outlined the detail of the case that was made against CSA, I have absolutely no doubt that the major claim against CSA was in respect of the façade of the building and the design negligence finding made by the Referee was one that could not be adopted. 20 The windows negligence claim and finding was, in my view, a minor matter relative to the claims ultimately made against CSA. However, CSA also maintained a limitation defence on a number of occasions which had been dealt with in judgments since March 2009: Eko Investments Pty Limited v Austruc Constructions Limited & Ors; The Owners Strata Plan No 64970 v Austruc Constructions Limited & Ors [2009] NSWSC 208 at [67]-[74]; The Owners Strata Plan No. 64970 v Austruc Constructions Limited & Anor (No 3) [2010] NSWSC 60 at [45]-[51]; and The Owners Strata Plan No. 64970 v Austruc Constructions Limited & Anor (No. 4) [2010] NSWSC 212 at [40]-[53].

21 The plaintiff was unsuccessful against CSA in respect of the contents claim. This particular aspect of the case complicates the question of costs because, but for the procedural unfairness that was meted out to CSA, the plaintiff would have been successful in suing CSA to judgment: The Owners Strata Plan No. 64970 v Austruc Constructions Limited & Anor (No. 4) [2010] NSWSC 212 at [31]-[33]. However, it was necessary to refer the matter back to the Referee to provide CSA with an opportunity to be heard in relation to the matter upon which the procedural unfairness occurred. That was referred to in the previous judgments as the "new issue": Eko Investments Pty Limited v Austruc Constructions Limited & Ors; The Owners Strata Plan No 64970 v Austruc Constructions Limited & Ors [2009] NSWSC 208 at [96]; The Owners Strata Plan No. 64970 v Austruc Constructions Limited & Anor (No 3) [2010] NSWSC 60 at [31] and [39]; and The Owners Strata Plan No. 64970 v Austruc Constructions Limited & Anor (No. 4) [2010] NSWSC 212 at [13]. The Referee was also requested to provide an explanation in relation to his finding of design negligence: 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 at [14].

22 The aim of having cases in this List heard promptly and dealt with consistently with the overriding purpose of the Rules - the just, quick and cheap resolution of the real issues in dispute - may in this instance appear rather illusory. However this was not a straightforward case. As can be seen from each of the judgments there were multi-parties and multi-issues and it is not a simple matter to identify the "event" that the authorities say costs should normally follow - Lenning v Alexander Proudfoot Co World Headquarters [1991] NSWCA 172; Hooker v Gilling (No 2) [2007] NSWCA 214 at 25. There were in this case a number of "events". However, it is necessary in making a costs order to take into account the principles enunciated in those cases that costs should follow the event but in cases where there are a number of events, it is necessary to take those events into account. 23 Ultimately after the further reference and adoption hearing, CSA was successful in the main claim resisting the design negligence finding in relation to the façade and resisting the liability for the Contents Claim by reason of the prejudice (obviously irreparable). The "event" is that the plaintiff failed in its design negligence and Contents Claims against CSA. These were significant aspects of the claims against CSA. But to counter that and to, perhaps on one view of it, dilute its success, CSA sought to argue a point that CSA claimed had not been dealt with in the previous judgments in relation to the limitation point. Notwithstanding opposition to that, I finally dealt with that on 23 April 2010: The Owners Strata Plan No. 64970 v Austruc Constructions Limited & Anor (No. 4) [2010] NSWSC 212 ([40]-[53]) CSA failed in that claim and all previous limitation arguments. They are also relevant "events".

24 Mr Faulkner approached the application on the basis that if one looks at the quantum of the claims made against CSA, the plaintiff has had an abysmal result. The figures outlined by Mr Faulkner in the schedule amount to claims of $6.45 million. The entry of judgment for $170,804.18 bears little resemblance to a success if one is only looking at the figures. 25 Mr Sirtes cautions against such an approach and submits that it is appropriate to make the order sought by him carving out costs of proceedings in this Court for the first two adoption hearings. However, if CSA is to have an order in its favour, Mr Sirtes submits it is necessary to take into account the way in which the Reference was run and submitted that very little time was spent on various issues, albeit that they may have involved large figures. 26 In that regard both Mr Faulkner and Mr Sirtes have taken me to tabs 1 and 2 of the exhibit to Ms Golovanoff's affidavit of 26 May 2010. Mr Faulkner relied on item 6.2(a) and (b) as evidence of CSA's liability for the windows amounting in that schedule to $48,551. Mr Sirtes has relied upon what was said by Mr Karsai, an expert instructed by the plaintiff, at page 714 of the transcript before the Referee on 22 April 2008, part of exhibit A on this application. The exchange between the referee and Mr Karsai was as follows: REFEREE: You generally think it is a lack of design which led to most or all of the problems with water ingress, I understand?

KARSAI: A number of the problems with water ingress.

REFEREE: Are there some that arise from workmanship, in your view?

KARSAI: Some of it most probably does arise from workmanship issues but my comment would be that if the workmanship had been perfect, then inevitably it would have leaked anyway. 27 Mr Sirtes submitted that this exchange encapsulated the plaintiff's case - that it was a Building that would leak by design. He submitted that it was not a big issue and it was not necessary for his client to enter the debate about whether the control joints were in the wrong position and/or whether the control joints were painted or plastered over. It was submitted that effectively it was an all or nothing case, designed to leak or not designed to leak. Would that it had been so simple. This case, as I said, had many complex features to it, one of which included the question of the cause of the leaks. It was necessary for the Referee and the experts who were called upon to assist him to identify the cause of the leaks and that process was part of the decision making as to whether the building leaked by design. 28 The Referee found against the plaintiff on the claim that it leaked by design. However the Referee found in the plaintiff's favour that there was design negligence in respect of the façade of the building that was part of the plaintiff's claim and it seems to me to have taken up a great deal of the time during the Reference. I do not accept Mr Sirtes' characterisation of the nature of the claim against CSA. It was not a limited claim. The design negligence claim was more than just the claim of leaking by design. It was a major claim. 29 The plaintiff succeeded on one aspect of its claim in respect of the design - being the windows and also in respect of the podium slab. Judgment has been entered in its favour. CSA was successful in resisting design negligence for the façade. CSA failed in its limitation defence. CSA was successful in having the matter referred back in respect of the denial of procedural fairness and was successful in having the contents claim against it dismissed after remitter. These were all "events" in this process. As I have already said, the procedural unfairness was not the fault of the plaintiff. Mr Sirtes submitted that a certificate might issue in respect of that aspect of the case, or alternatively the plaintiff's lack of fault should be taken into account in any percentage apportionment of costs. 30 The last hearing before the delivery of a judgment on 23 April 2010 was another "event" in respect of which CSA was not successful. It failed to resist the claim in respect of contribution and it failed in respect of the statutory interpretation point, that is the further limitation argument. I am satisfied that the fair result is not to make the order sought in paragraph 6 of the Short Minutes of Order propounded by the plaintiff. I will delete paragraph 6. In reviewing all these events in this lengthy process I am satisfied that in respect of the proceedings before the Referee the plaintiff is to pay 50% of CSA's costs. In respect of all proceedings in this Court, being each of the adoption hearings and other appearances, as between the plaintiff and CSA each party is to pay their own costs. I make those orders. **********

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