The Owners - Strata Plan 98726 v Elite Realty Development Pty Ltd (No 3)

1. [1]

   The plaintiff is the owners corporation in respect of a residential development in Maroubra comprising a three-level residential unit block, consisting of nine units (“the Property”). Each unit has a balcony or courtyard. The Property has one level of basement parking and a flat concrete tiled slab building roof with planter boxes.

2. [2]

   The defendant, Elite Realty Developments Pty Ltd (“the Builder”), is the builder of the Property. It was engaged by the developer, Maroubra Road Development Pty Ltd, by a contract dated 19 September 2017. The works were completed on 11 December 2018.

3. [3]

   The owners corporation brings these proceedings against the Builder for breaches of statutory warranties implied into the building contract as successor in title to the Property. [1]

4. [4]

   Substantial and systemic defects have been identified in the Property, with the costs of rectification assessed by the owners corporation’s quantity surveying expert, Mr Matthew Spicer, at $3,080,269.26.

5. [5]

   On 12 April 2024, I entered judgment in favour of the owners corporation against the Builder, with damages to be assessed. [2] I also dismissed the cross-claims that the Builder had hitherto made against third parties but had not pursued. [3]

6. [6]

   The matter was set down for assessment of damages before me on 27 May 2024. The Builder did not participate in the hearing.

7. [7]

   The measure of damages for defective building work is the reasonable costs of rectification, so as to give the plaintiff “the equivalent of a building … which is substantially in accordance with the contract”. [4] The work must be “necessary to produce conformity” with the contract and also “must be a reasonable course to adopt”. [5] These are questions of fact to be examined in each case.

8. [8]

   Such work will only be considered unreasonable in “fairly exceptional circumstances”, such as where the innocent party is “merely using a technical breach to secure an uncovenanted profit”, [6] or where the cost of the “proposed rectification is out of all proportion to the benefit to be obtained”. [7]

9. [9]

   I have been greatly assisted by the careful submissions prepared by Mr Chatterjee, who appeared for the owners corporation.

10. [10]

    Much of what follows is taken, with gratitude, from Mr Chatterjee’s submissions.

The defects

1. [11]

   There are a number of distinct categories of defects. While the total quantum of rectification costs is significant, this largely arises from the fact that each of the defects identified arises in multiple instances across the Property.

2. [12]

   The two most expensive single defects arise from the need for remediation of:

3. [13]

   The majority of defects otherwise are individually less than $9,000 (333 items), with the remainder ranging from $10,420 to $26,545 (37 items).

4. [14]

   The owners corporation relied upon expert reports from:

5. [15]

   Mr Mirilovic has identified the following building defects:

6. [16]

   Mr Pomeroy has identified recurring defects in the external façade of the Property, caused by:

7. [17]

   Mr O’Neill has identified that it was a requirement of the Development Application Approval for the basement to be “tanked” and that this has not been done. Mr O’Neill also identified that there was “significant evidence of water ingress through the shoring wall and into the basement stormwater pits”, as well as “water rising vertically from underneath the basement slab and penetrating onto the basement slab via the isolation joint around the concrete column”.

8. [18]

   Mr Laurie has identified a number of systemic plumbing defects as follows:

9. [19]

   Mr Laurie has also identified a variety of additional plumbing installation defects, some of which apply to multiple units or common areas.

10. [20]

    Mr Matthews has identified eight defects in the electrical installation to the Property.

11. [21]

    Mr Yedalian has identified ventilation defects, being:

Consequential and other losses

1. [22]

   The owners corporation obtained reports from a mycologist, Dr Heike Neumeister-Kemp, who has found that there is mould in seven of the units. Dr Neumeister-Kemp has assessed that six of the seven inspected units are non-habitable and that two have locations of “high to very high levels of airborne fungi”.

2. [23]

   The owners of those two units have made claims on the owners corporation for rectification of the mould problem.

3. [24]

   The claims made against the owners corporation are for a closed period, although the mould problem seems to be ongoing.

4. [25]

   The owners corporation also claims damages for the cost of relocating the residents of the Property during remediation works.

5. [26]

   The owners corporation has adduced evidence from Mr Steve Abbott, who has prepared a programming report for remediation works, and Mr Darren Keen, a valuer, who has prepared a valuation report for the cost of alternative accommodation during the work.

6. [27]

   That evidence shows that the cost of alternative accommodation that is of equivalent quality for a works program will be in the order of $258,000.

Damages overall

1. [28]

   The evidence adduced by the owners corporation satisfies me that the likely total cost of remedying the building defects, and providing for alternative accommodation while remediation works is carried out, is $3,080,269.26.

2. [29]

   The evidence before me shows that proposed work is necessary to produce conformity with the building contract and is the reasonable course to adopt. There is no suggestion in the evidence that the owners corporation is seeking to secure an uncovenanted profit or that the costs are out of proportion to the benefit to be gained. [9]

3. [30]

   I enter judgment in favour of the plaintiff against the first defendant in that sum.