The Owners - Strata Plan No 84674 v Pafburn Pty Ltd

The appointment of Mr Obeid as nominated supervisor of the building work

1. The first is contained in the proposed par C12B(f) which provides: "At all material times, [Mr Obeid]: … (f) as the sole director and controlling mind of the [Developer] (the owner of the development), appointed himself as the nominated supervisor of the building work by contracting, on behalf of the [Developer], the [Builder] (of which [Mr Obeid] was the nominated supervisor) to carry out the building work."
2. The allegation in this paragraph is thus that Mr Obeid: 1. "appointed himself" as nominated supervisor of the building work; 2. did so "as sole director and controlling mind" of the Developer; and 3. did so "by contracting", on behalf of the Developer, with the Builder to carry out the building work.
3. In substance, the allegation is that it follows from: 1. the fact that Mr Obeid, as sole director of the Developer, caused the Developer to contract with the Builder to carry out the building work; that 2. he, as a director of the Developer, appointed himself as nominated supervisor of the building work.
4. I find it difficult to see how the conclusion in (b) could follow from the matters in (a). For the reasons that follow, it is not necessary for me to express a conclusion about this.

The Developer's alleged supervision, coordination and project management of the building work

1. The second conclusion is in proposed par C12C which provides: "At all material times, the [Developer] supervised, coordinated and project managed the carrying out of the building work by the [Builder] as the sole director and controlling mind of the [Developer] was the nominated supervisor of the building work. Particulars The [Owners Corporation] repeats paragraphs 12A and 12B above."
2. The particulars repeat "paragraphs 12A and 12B" of the proposed Amended List Statement. Those paragraphs contain the factual allegations that I have set out at [26] above.
3. Mr Weinberger, who appeared for the Owners Corporation, accepted that the word "as" in this paragraph of the proposed Amended List Statement should be read as meaning "because".
4. Thus, the allegation in proposed par C12C is that because: 1. Mr Obeid was the sole director and controlling mind of the Developer and also the nominated supervisor of the building work; it follows that 2. the Developer "supervised, coordinated and project managed the carrying out of the building work" by the Builder.
5. I initially had difficulty seeing how (b) could follow from (a).
6. As Mr Di Francesco for the Builder and Developer submitted, Mr Obeid could only be a nominated supervisor of the Builder if he, personally, held an "endorsed contractor licence" that enabled him to supervise the work "for which the contractor licence applied for … is required"; that is, the work to be carried out by the Builder. [10] Mr Obeid was thus the Builder's nominated supervisor in his personal capacity as a licensed builder and not as a "functionary" of the Developer.
7. However, what appears to be alleged in par C12C is a matter of fact. That is that because Mr Obeid concurrently held the positions of sole director and thus "controlling mind" of the Developer and also the Builder's nominated supervisor he, in his capacity as the sole director and "controlling mind" of the Developer, in fact "supervised, coordinated and project managed the carrying out of the building work".
8. That proposition may not be made out at the hearing. But I cannot conclude at this stage that it certainly will not be.

The Developer's alleged substantive control over the building work

1. The third conclusion is contained in proposed par C12D, which is in the following terms: "At all material times, the [Developer] had substantive control over the carrying out of the building work by the [Builder] in that: (a) the sole director and controlling mind of the [Developer] was the nominated supervisor of the building work; (b) the controlling shareholder of the [Builder], who was the sole shareholder of the [Developer], was the nominated supervisor of the building work; (c) by reason of the matters pleaded in paragraphs 12D (a)-(b) above: (i) the [Developer] had the ability and the power to control how the building work was carried out; and (ii) the [Developer] in fact controlled how the building work was carried out.
2. The allegation here is that, by reason of the fact that Mr Obeid was: 1. the sole director and controlling mind of the Developer, and the "controlling shareholder" of the Developer's parent company, the Builder; and also 2. the nominated supervisor of the building work; 3. it follows that: 1. the Developer, by Mr Obeid, had the ability and power to control how the building work was carried out and thus, consistently with my finding in the 24 May 2022 judgment, had substantive control over the carrying out of that building work; and 2. "in fact controlled" how the building work was carried out.
3. Again, I initially had difficulty seeing how the conclusions in (c) could follow from the matters in (a) and (b).
4. However, as I have said, a person will have "substantive control" over building work if the person is able to control how the work is carried out; a question of fact in each case. [11]
5. In those circumstances, and on reflection, I think it at least arguable that because Mr Obeid had the concurrent capacities as sole director of the Developer and the Builder's nominated supervisor, he may, as a matter of fact, and in his capacity as a director of the Developer, have had the ability to control how the building work was carried out.
6. I am persuaded that Mr Weinberger was correct to submit that whether Mr Obeid, in his capacity as sole director of the Developer, did in fact control how the work was carried out is a matter of fact to be explored at the hearing.

Conclusion

1. The "jurisdiction summarily to terminate an action is to be sparingly employed and is not to be used except in a clear case where the Court is satisfied that it has the requisite material and the necessary assistance from the parties to reach a definite and certain conclusion" that the claim is "so obviously untenable that it cannot possibly succeed". [12] I am unable to reach that conclusion here because I cannot conclude that the Owners Corporation is incapable of establishing, on the basis proposed in the Amended List Statement, that the Developer was able to and in fact did control how the building work was carried out; and thereby engaged in construction work within the meaning of ss 36 and 37 of the DBP Act.
2. For those reasons I decline to dismiss the proceedings as against the Developer.

The "New Defects"

1. As I mentioned in my 24 May 2022 judgment, [13] there is annexed to the proposed Amended List Statement a "Scott Schedule" which identifies some 330 alleged defects under the headings "Internal Water Proofing and General Building Defects", "Fire and General Safety Defects" and "External Façade Defects".
2. A number of the particular defects alleged under these general headings are "new" in the sense that they were not identified in the List Statement filed on 1 December 2020.
3. In my 24 May 2022 judgment, I held that the identification of these "new" defects did not introduce new causes of action against the Builder or the Developer and that the Owners Corporation relies on a single cause of action; namely, the alleged breach of the statutory duties under s 37 of the DBP Act. [14]
4. The parties have now produced a document which identifies the "new" defects as being ones identified by a number of experts in reports prepared in July 2021; some seven months after these proceedings were commenced on 1 December 2020.
5. The Owners Corporation seeks leave to amend its claim to add these "new" defects.
6. Mr Di Francesco submitted that leave should be refused as the Builder and the Developer are prejudiced by reason of not being able to bring cross-claims against two nominated parties: the certifier and a water proofing contractor, relating to the "new" allegations.
7. However, in their List Response the Builder and the Developer have identified those two parties as concurrent wrongdoers for the purposes of s 34 of the Civil Liability Act 2002 (NSW) and seek an order under s 35 of that Act limiting their liability to the Owners Corporation to an amount reflecting their relative responsibility for the Owners Corporation's loss. Bringing a cross-claim against those parties would not be likely to advance their position.
8. In any event, the Builder and the Developer were served with the current Summons and List Statement on 4 December 2020, two days before the expiry of what Mr Di Francesco accepts was the limitation period for any cross-claim against those parties. They thus had no realistic prospect of bringing a cross-claim in any event.

Conclusion

1. I decline to dismiss the proceedings against the second defendant.
2. I grant the plaintiff leave to amend its List Statement in accordance with the document circulated on 28 June 2022.
3. The parties should confer and agree on the orders necessary to give effect to these reasons.
4. If there is a dispute about costs, the parties should confer and agree on a timetable for brief submissions (not more than five pages). I will deal with that question on the papers.
5. I stand the proceedings over for directions in the Technology and Construction List on 5 August 2022.

Endnotes

1. The Owners - Strata Plan No 84674 v Pafburn Pty Ltd [2022] NSWSC 659.
2. At [25]-[26].
3. C12B(b).
4. C12B(c).
5. C12A(b) and C12B(a).
6. C12B(d) and C12B(e).
7. C12B(e)(i) and (ii).
8. C12B(g).
9. C12A(a).
10. Home Building Regulation 2004 (NSW) reg 26(4); the applicable regulation at the relevant time.
11. See [14(a)] above and [26] in my 24 May 2022 judgment.
12. General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 at 128-129; [1964] HCA 69 at [8] (Barwick CJ).
13. At [28].
14. At [35]-[36]. 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: 27 July 2022