Supreme Court New South Wales Medium Neutral Citation: The Owners – Strata Plan No 89005 v Stromer (No 3) [2022] NSWSC 1707 Hearing dates: 9 December 2022 Decision date: 15 December 2022 Jurisdiction: Equity - Technology and Construction List Before: Ball J Decision: (1) Strike out paragraphs 20 to 33 of the Technology and Construction List Cross-Claim Statement filed on 23 December 2021; (2) Direct that any application to file an amended Technology and Construction List Cross-Claim Statement be served no later than 17 February 2023 and be made returnable on 24 February 2023; (3) Order that the cross-claimant pay the second cross-defendant's costs of the Notice of Motion filed 20 October 2022. Catchwords: CIVIL PROCEDURE — Summary disposal under UCPR r 13.4 — Dismissal of cross-claim — Defective pleading concerning statutory duty under s 37 of the Design and Building Practitioners Act 2020 (NSW) — Whether Scott Schedule provided by the cross-claimant adequately identifies the precautions the building supervisor should have taken to manager the risk of harm Legislation Cited: Design and Building Practitioners Act 2020 (NSW) Home Building Act 1989 (NSW) Uniform Civil Procedure Rules 2005 (NSW) Cases Cited: The Owners – Strata Plan No 87060 v Loulach Developments Pty Ltd (No 2) [2021] NSWSC 1068 Category: Procedural rulings Parties: The Owners – Strata Plan No 89005 (Plaintiff) Thomas Stromer (First Defendant | First Cross-Claimant) Simone Stromer (Second Defendant | Second Cross-Claimant) Nathan Stromer (Third Defendant | Third Cross-Claimant) Farad Electric Co Pty Ltd (Fourth Defendant | Fourth Cross-Claimant) Mondan Management Pty Ltd (in liq) t/as Vic Lilli & Partners (First Cross-Defendant) Peter Smith Constructions Pty Limited (Second Cross-Defendant) Representation: Counsel: B Stanton (Solicitor) (Plaintiff) P Folino-Gallo (Second Cross-Defendant | Applicant) J O'Sullivan (Defendants | Cross-Claimants) Solicitors: Stanton Legal (Plaintiff) Bradbury Legal (Second Cross-Defendant | Applicant) & Legal (Defendants | Cross-Claimants) File Number(s): 2019/294941 Publication restriction: Nil JUDGMENT 1. By a Notice of Motion filed on 20 October 2022, the second cross-defendant, Peter Smith Constructions Pty Limited (the Building Supervisor), seeks summary dismissal of the cross-claim against it under Uniform Civil Procedure Rules 2005 (NSW) r 13.4. That rule gives the Court power to dismiss proceedings or a claim where: (a) the proceedings are frivolous or vexatious, or (b) no reasonable cause of action is disclosed, or (c) the proceedings are an abuse of the process of the court … 1. In the proceedings, the plaintiff, which is the owners corporation in respect of a residential strata development in Randwick (the Owners Corporation), brings a claim relevantly against the fourth defendant, Farad Electric Co Pty Ltd (the Builder), which was the builder of the strata development, for breaches of the warranties implied by s 18B of the Home Building Act 1989 (NSW) in respect of alleged defects in the building work. 2. By paragraphs 20 to 33 of the Technology and Construction List Cross-Claim Statement filed on 23 December 2021, the Builder brings a claim against the Building Supervisor, in which it alleges that: 1. it retained the Building Supervisor to provide building design, consultancy and supervision services to it with respect to the building works undertaken by it; 2. the Building Supervisor owed the Builder and the Owners Corporation a duty "to exercise reasonable care to avoid economic loss caused by defects". That duty is said to arise from s 37 and cl 5 of Sch 1 to the Design and Building Practitioners Act 2020 (NSW); 3. if the building work suffered from the defects alleged by the Owners Corporation, then the Building Supervisor breached its duty of care; 4. therefore, the Building Supervisor is liable to contribute to, or indemnify the Builder in respect of, any liability the Builder has to the Owners Corporation. 1. When the Notice of Motion first came before the Court on 4 November 2022, the Building Supervisor submitted that the cross-claim failed to plead the facts and matters by reason of which it was said that it had breached its duty of care. The Building Supervisor pointed out correctly that the mere fact that the building suffered from a number of defects did not establish that its supervision had been negligent: see The Owners – Strata Plan No 87060 v Loulach Developments Pty Ltd (No 2) [2021] NSWSC 1068 at [22]ff per Stevenson J. 2. The Builder was given an opportunity to correct that defect. It chose to do so by providing particulars in the form of a Scott Schedule. The Schedule described the relevant defect in one column (which it described as the "Relevant Risk"). In a further column it set out "What PSC should have done in relation to the Relevant Risk". In almost all cases, what is alleged is that the Building Supervisor failed to "construct or supervise" the relevant work in a way that would have avoided the defect in question. 3. In my opinion, the particulars provided by the Builder are not an adequate solution to the problem with its pleading. An allegation that the Building Supervisor failed to take adequate steps to prevent the relevant harm from occurring without identifying what those steps were is not a proper pleading of negligence. What the Builder must do is identify the particular actions that are said that a person in the position of the Building Supervisor acting reasonably would have taken to avoid the relevant risk of harm. It then needs to allege that had the Building Supervisor taken those steps the harm would not have occurred. 4. To take just one example, an alleged defect is water penetration in the north wall of bedroom 3 of unit 1. The following particular of what the Building Supervisor should have done is given in respect of that allegation: Construct or supervise the construction of cavity wall flashing in compliance with performance requirements of clause FP 1.4 of the BCA to ensure a step down of the concrete floor slab under the external wall skin and compliance with clauses 4.7.3 and 11.4.6 of AS 3700-2001 that provide that sheet material used as a damp-proof course shall be at least 20mm wider than the thickness of the masonry member in which it is placed and shall project from each face and on completion of the construction, ensure that the projections shall be either cut off flush with the face of the wall or turned down. 1. Plainly, however, that is not an allegation of an absence of reasonable care. It is an allegation of failure to prevent the relevant defect. 2. In order to plead a proper case of negligence, it would be necessary for the cross-claim, for example, to allege that a reasonable person in the position of the Building Supervisor would have taken certain steps (such as inspected the construction of each cavity wall flashing at identified intervals) and that had they taken those steps they would have identified the problem and would have taken certain steps to rectify it. Whether such a case could be properly pleaded and, if it could, whether as a matter of fact it could be made out is open to question. But if the cross-clam is to be maintained, that is what needs to be done. 3. The Building Supervisor submits that such a case could not be pleaded and, in any event, could not be made out on the available evidence. For those reasons, it submits that it is entitled to summary dismissal of the claim. 4. I do not accept that submission. It is true that the Builder has already been given one opportunity to correct the defect in its pleading. In my opinion, it should be given one further opportunity to do so. However, the onus should be on it to satisfy the Court that the case has been properly pleaded. The orders I propose to make recognise that fact. 5. Although the Building Supervisor has not obtained the order it seeks, it has been substantially successful, since on the conclusions I have reached the claim cannot continue in its present form. In those circumstances, there is no reason why the Builder should not pay the Building Supervisor's costs of the motion. 6. Accordingly, I make the following orders: 1. Order that paragraphs 20 to 33 of the Technology and Construction List Cross-Claim Statement filed on 23 December 2021 be struck out; 2. Direct that any application to file an amended Technology and Construction List Cross-Claim Statement be served no later than 17 February 2023 and be made returnable on 24 February 2023; 3. Order that the cross-claimant pay the second cross-defendant's costs of the Notice of Motion filed on 20 October 2022. ********** 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: 14 February 2023