Supreme Court New South Wales Medium Neutral Citation: The Owners - Strata Plan No. 72827 v Isaac [2013] NSWSC 595 Hearing dates: 20 May 2013 Decision date: 20 May 2013 Jurisdiction: Equity Division - Technology and Construction List Before: Stevenson J Decision: Judgment for the plaintiff in the sum of $1,218,338 plus costs Catchwords: BUILDING AND CONSTRUCTION - Home Building Act 1989 - Statutory warranties Legislation Cited: Home Building Act 1989 Strata Schemes (Freehold Development) Act 1973 Strata Schemes Management Act 1996 Category: Principal judgment Parties: The Owners - Strata Plan No. 72827 (plaintiff) Nazih Isaac (defendant) (no appearance) Representation: Counsel: J J Young (plaintiff) Solicitors: Grace Lawyers (plaintiff) File Number(s): SC 2012/264305 Publication restriction: Nil Judgment Introduction 1In these proceedings the plaintiff seeks damages from the defendant, who was the builder of a strata residential apartment development at Harris Park in Sydney. The plaintiff's claim arises from defects and deficiencies in the common property in that development which the plaintiff contends amount to breaches of the statutory warranties ("the Statutory Warranties") provided for by Pt 2C of the Home Building Act 1989 ("the Act"). 2The proceedings were initially commenced in the Consumer Trader and Tenancy Tribunal ("the CTTT") and were transferred to this Court in 2012. 3The defendant was served with the originating process in the CTTT but has not appeared at the CTTT or in this Court. On 16 November 2011, the defendant told the solicitor for the plaintiff "I do not intend to defend these proceedings". 4On 23 November 2012, I set the proceedings down for hearing on 20 February 2013 as an undefended matter. On the application of the plaintiff, that hearing date was vacated to accommodate a delay in the production of the evidence relied on by the plaintiff, and the matter was set down for hearing today. 5I am satisfied that the defendant is aware of today's hearing date and that he has been served with the evidence on which the plaintiff relies. The defendant was called outside the Court. There was no appearance. Background 6The plaintiff is the owners corporation for Strata Plan No 72827 ("the Strata Plan"). It is, pursuant to s 18 of the Strata Schemes (Freehold Development) Act 1973, the registered proprietor of the common property in the Strata Plan. 7At the relevant times up to 24 May 2004, being the date of the registration of the Strata Plan, the land upon which the development was constructed was owned by Globe Constructions Pty Ltd ("Globe"). Globe is now deregistered. 8The defendant is and was at the relevant times a builder licensed to do residential building work under the Act. 9By an agreement between the defendant and Globe ("the Contract"), the defendant agreed to construct the development for Globe. 10The work under the Contract involved the construction of a seven level mixed use development containing four office/retail units and 40 residential apartments, containing, inter alia, car parks for the use of the occupants of the residential apartments. The residential apartments and those parts of the development that are associated with and to be used in conjunction with the residential apartments are "dwellings" for the purposes of the Act. Accordingly, the work involved in the construction was "residential building work" for the purposes of the Act and the Contract was a contract to do "residential building work" under the Act. 11Accordingly, the Statutory Warranties were implied into the Contract between the defendant and Globe by s 18B of the Act in the following terms: - (a)a warranty that the work will be performed in a proper and workmanlike manner and in accordance with the plans and specifications set out in the contract; (b)a warranty that all materials supplied by the holder or person will be good and suitable for the purpose for which they are used and that, unless otherwise stated in the contract, those materials will be new; (c)a warranty that the work will be done in accordance with, and will comply with, this or any other law; (d)a warranty that the work will be done with due diligence and within the time stipulated in the contract, or if no time is stipulated, within a reasonable time; (e)a warranty that, if the work consists of the construction of a dwelling, the making of alterations or additions to a dwelling or the repairing, renovation, decoration or protective treatment of a dwelling, the work will result, to the extent of the work conducted, in a dwelling that is reasonably fit for occupation as a dwelling; and, (f)a warranty that the work and any materials used in doing the work will be reasonably fit for the specified purpose or result, if the person for whom the work is done expressly makes known to the holder of the contractor licence or person required to hold a contractor licence, or another person with express or apparent authority to enter into or vary contractual arrangements on behalf of the holder or person, the particular purpose for which the work is required or the result that the owner desires the work to achieve, so as to show that the owner relies on the holder's or person's skill and judgment. 12In turn, by reason of s 18D of the Act, the plaintiff, as a successor in title to Globe who had the benefit of the Statutory Warranties, is entitled to the benefit of the Statutory Warranties as against the defendant. It enforces those Statutory Warranties in these proceedings. 13Since at least 2008, the building has exhibited defects ("the Defects"). The defendant was notified of the Defects on many occasions, has never denied them, and has failed to rectify them. 14Pursuant to s 62 of the Strata Schemes Management Act 1996, the Plaintiff is obliged to cause the repair of the Defects. In any event, as registered proprietor of the common property, it is reasonable to have the Defects rectified. As a result, the plaintiff has suffered loss representing the reasonable and necessary cost of, and incidental to, the rectification of the Defects. 15The Defects, as identified in the report of Mr Moisidis of Bellmont Façade Engineering dated 19 April 2013 ("the Bellmont Report") (updating Mr Moisidis' earlier preliminary report dated 27 July 2012 ("the Preliminary Report")), fall into the following categories: - (a)efflorescence leaching through the balcony roof slab and façade interface, and paint delamination to the garage entry slab edge, each due to defective terrace and planter waterproof membranes; (b)cracking of internal render in various locations due to lack of control joints and related causes; (c)failure of bathroom and ensuite waterproofing; (d)water ingress associated with incorrect detailing of cavity flashing and/or balcony waterproof membranes; and (e)other, miscellaneous, defects. 16In his reports, Mr Moisidis opines that the Defects arise from poor workmanship and/or failure to comply with the Building Code of Australia ("the BCA") and/or the Australian Standards. 17The Defects are, thus, in breach of: s 18B(a) of the Act (work will be performed in a proper and workmanlike manner); s 18B(b) (materials supplied will be good and suitable for the purpose for which they are used); s 18B(c) (the work will be done in accordance with, and will comply with, the law, namely, the BCA); and s 18B(e) (the work will result, to the extent of the work conducted, in a dwelling that is reasonably fit for occupation as a dwelling). 18Mr Moisidis has prepared a detailed scope of work for rectification of the Defects ("the Rectification Works"). 19Mr Moisidis has obtained three arms-length commercial tender prices for the Rectification Works as follows: - (a)MDP Building Services Pty Ltd: $1,218,338; (b)Remedial Building Services Pty Ltd $1,470,832; and, (c)Transcivic Engineering: $829,950. 20In the opinion of Mr Moisidis, which I accept, MDP Building Services Pty Ltd have demonstrated a better understanding of the project than either of Remedial Building Services Pty Ltd (which tendered at a higher price) or Transcivic Engineering (which tendered at a lower price) and are best equipped to carry out the work. Conclusion 21I am satisfied that, in these circumstances, the plaintiff has established the existence of the defendant's obligations under the Statutory Warranties, the existence of the Defects and breaches of the Statutory Warranties, and the reasonable method and cost of rectification thereof. 22The plaintiff is entitled to damages representing the reasonable cost of rectification identified above, and costs. 23I am satisfied that the damages to which the plaintiff is entitled are represented by the amount of MDP's tender. 24I enter judgment for the plaintiff against the defendant in the sum of $1,218,338. 25I order that the defendant pay the plaintiff's costs. 26I make the usual order concerning the return of exhibits. ********** 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: 20 May 2013