The Owners - Strata Plan No 80818 v Conquest Constructions

Respondent's evidence 12The respondent's evidence consists of the documents served on the applicant and filed with the Tribunal, and the oral evidence of Mr Waldron and Mr Uzelac. The documents filed by the respondent consisted of a document called a defence to which was attached certain other documents each marked as an appendix. Some of these will be referred to in these reasons. The applicant did not object to the tender of the respondent's documents. 13Mr Waldron gave sworn evidence to the effect that the respondent did not know of the engagement of EFM until it received EFM's report in August 2010. He said that until then the respondent had been working with the applicants managing agent to resolve the alleged defects. He drew attention to document 5 of the applicant's documents. That was an email dated 6 September 2009 from the applicant's strata manager to Mr Wadron. That email refers to the fact that there was then discussion about work being undertaken to remedy defects. Mr Waldron also referred to document 6 of the applicant's documents, which is an email from Mr Waldron to the strata manager dated 5 August 2009 in which he comments upon defects including progress being made in relation to some of them. He referred to document 9 of the applicants documents, which is a letter dated 7 August 2009 from the Owners Corporation recording progress being made with respect to addressing defects. 14Mr Waldron said that the respondent had been remedying the defects and submitted that the above evidence confirmed that the respondent had been working with the applicant during 2009 to remedy the defects. He said it was unnecessary for the applicant to engage any consultant. 15Mr Waldron referred to a document contained in the submissions filed by the respondent being appendix E in those submissions. That includes a schedule of the defects each marked in a particular colour so as to indicate whether the respondent had or would address the defects. He said that less than 50% of the items listed were rectified. He said that the schedule which was prepared by EFM went much further than dealing with defects which could be regarded as the responsibility of the respondent. For example there were, he said, many items which were really in the nature of maintenance issues. Some items are identified on Appendix E as "maintenance" which the respondent rejected. 16Mr Waldron said that Appendix E was prepared by EFM and emailed to him. Over time it was amended to reflect the discussions between EFM and Mr Waldron. The version forming part of Appendix E is dated 9 February 2012. 17Mr Waldron stated that he had worked with the representatives of EFM (mainly Mr Stinson) during 2011 and that in early 2012 he had conversations with Ian Thompson of EFM by which he had reached a negotiated settlement. He said he had agreed to fix some alleged defects but a feature of the agreement was that the claim for recovery of EFM's fees was withdrawn. In Annexure E the claim for recovery of EFM's fee has been marked in blue and the blue items are recorded as having either already been rectified by the respondent or marked as "considered not an issue". Mr Waldron stated that this is evidence of the negotiated agreement he had reached with EFM. 18Mr Waldron referred to an email he received from Mr Stewart Smith on behalf of the Executive Committee dated 28 March 2012 (Appendix B). That email states: "Camargue held its AGM last night and a new Executive Committee was appointed. No members of the outgoing committee nominated or accepted nominations from members of the OC to stand again. Along with a complete file about the building rectification works the incoming committee has been left a closing précis advising that a summary has to be drawn up nominating any works that have yet to be completed or yet to be commenced. This is per your last instruction Ian. It has been a successful 12 months with the majority of the rectification being completed and that has been largely due to the efforts by all parties involved. I would like to thank you both for your professional approach to the building rectification works and for your consideration to our needs and concerns. These thanks are on behalf of all the retiring members of the EC. As special thanks also has to go to Dave (Rankin) who at all time represented Conquest Constructions in the most favourable light. He was always courteous and obliging. From a personal aspect you both made by position as the liaison member of the EC a lot easier and that was greatly appreciated. Everyone at Camargue looks forward to the completion of the remaining works in the near future and I'm sure the new committee will be in contact with you in due course". Mr Waldron said that during early 2012 Mr Smith raised EFM's fee with him and he responded by saying that Conquest would not be paying those fees. There was further communications with EFM concerning defects. 19Mr Waldron said that in early 2013 Mr Jessep contacted him and a meeting was arranged. He said that at that meeting there was a discussion about remaining defects but he does not remember EFM's fee being discussed.

Findings 20The applicant is the owners of the common property and is entitled to the benefit of the statutory warranties provided in the HBA (s18C). The effect of the section is to provide that the applicant is entitled to the benefit of the statutory warranties as if the builder had done the work under a contract with the applicant. This means that the applicant's case against the respondent is limited to the expense incurred by the applicant in addressing defects to the common property. Defects to lot property are matters for individual lot owners to address. 21The applicant also submitted that the builder owed a duty to exercise reasonable care in the construction of the building to avoid causing the applicant to suffer loss resulting from latent defects in the common property vested in the applicant. The applicant relies upon the decision of the Owners Strata Plan No 61288 v Brookfield Australia Investments Ltd [2013] NSWCA 317 (the Brookfield case). That case held that the builder did owe a duty of care to the body corporate in which the common property was vested (paragraph 127) and that the duty of care covered loss resulting from latent defects in the common property, which were structural, or constituted a danger to persons or property in, or in the vicinity of, the serviced apartments, or made them uninhabitable (paragraph 132). 22In my view, the Brookfield case does not support the proposition that the builder owes a duty of care to the Owners Corporation in respect of damage to property of lot owners unless such damage arose by reason of a failure of the Owners Corporation to comply with the duty to maintain the common property. In this case there is no evidence that the defects to lot property were caused by defects to the common property or by the failure of the applicant to maintain common property, and the Tribunal was not invited to infer such a causal connection in respect of any of the defects concerning lot property. 23Here the applicant's claim is for the cost of obtaining the advice of EFM which is evidenced in EFM's report of 4 August 2010, and documents 22 (an EFM Schedule of Defects dated 18 July 2010) and appendix E. It is clear that the brief given to EFM was not limited to defects to common property. The brief included a review of lot property. There is no evidence as to how much of the fee of EFM was attributable to its work in respect of the common property and how much in respect of lot property. The applicant was invited by the Tribunal to adduce evidence as to how much of the EFM fee related to defects to common property as opposed to defects to lot property. Such evidence was not forthcoming. The applicant did submit that the defects could be apportioned "80% common property and 34% individual lots of total defects as assessed by the respondent". However, the question is not the relationship in percentage terms between common property defects and lot property defects but rather what would EFM have charged had its brief been limited to a review of common property defects. 24Accordingly, the applicant's claim must be dismissed because the amount sought to be recovered relates to work performed by EFM in respect of defects which did not relate to the property of the applicant or which were defects which the applicant was obliged to rectify. Furthermore, there is no evidence available which would enable the Tribunal to delineate EFM's work (and therefore fees) between the common property and lot property. 25The conclusion above is not the only reason the claim must be rejected. In addition, I agree with the submission of the respondent that the respondent and EFM had negotiated which of the defects the respondent would rectify and which of the defects the respondent would not. The evidence is that the claim for fees was effectively withdrawn by EFM which recorded the fee claim as "not an issue". The applicant submits that the respondent cannot rely on this apparent agreement between the respondent and EFM. However, the evidence is clear that the respondent and EFM were in direct communication concerning the schedule of defects. The nature of the correspondence to and from EFM demonstrates that it had authority to negotiate with the respondent. For example the email quoted above from Mr Smith suggests that Ian of EFM had instructions from the Executive Committee. The schedule referred to earlier (part of appendix E) has a column for Executive Committee comments. The weight of the evidence leads me to conclude that the respondent and EFM on behalf of the applicant had negotiated a position by which the recovery of EFM's fees was no longer being pressed. The applicant did not provide any evidence in this respect contradicting the evidence relied upon by the respondent. 26The respondent also submitted that the applicant had made a commercial decision to engage EFM and that it was unnecessary to do so as the respondent had been working on the rectification of defects with representatives of the applicant. On the assumption that the respondent was in breach of its obligations to rectify defects (which the applicant contends was the case) the applicant is entitled to those damages which naturally arise according to the usual course of things (Hadley v Baxendale). In my view the decision made by the applicant's executive committee in April 2010 to engage EFM was a decision to which the respondent was not privy. I accept Mr Waldron's evidence that the respondent did not know of the engagement of EFM until after its report had issued. I note that in the case of Auburn Municipal Council v ARC Engineering Pty Ltd; SDC Kennedy and Bird Pty Ltd [1973] 1 NSWLR 513 the Court of Appeal allowed a claim for consultants fees. The Court said that in the circumstances of that case the incurring of certain expenses including consultant's fees was necessary (per Moffitt AP p524). In the circumstances of this matter I do not think that the applicants decision to engage EFM in April 2010 (and thereby incur an obligation to pay fees) resulted in an expense which naturally arose from the breach according to the usual course of things (following the principle in Hadley and Baxendale) or was necessary (to adopt the language of Moffitt AP). Although I accept that the applicant did not have the expertise within its Executive Committee to identify all defects or propose remedial work, there is insufficient evidence to enable the Tribunal to decide that the respondent was not attending to its obligations to remedy defects, thus making it necessary for the applicant to engage expert assistance. 27For the reasons described in the preceding paragraphs, I am not satisfied that the applicant has discharged its onus of proving on the balance of probabilities that the amount claimed from the respondent is recoverable on either of the two bases upon which the applicant put its case. I will make an order dismissing the application. S Westgarth Deputy President Civil and Administrative Tribunal of New South Wales 15 May 2014 I hereby certify that this is a true and accurate record of the reasons for decision of the New South Wales Civil and Administrative Tribunal. Registrar

I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 31 July 2014