The Owners - Strata Plan No 87060 v Loulach Developments Pty Ltd (No 2)

1. [1]

   The plaintiff is the Owners Corporation of a residential strata development in Paramatta.

2. [2]

   The Owners Corporation alleges that there are a large number of defects in the development, principally concerning water ingress and defective cladding.

3. [3]

   The Owners Corporation brings these proceedings against the first defendant, Loulach Development Pty Ltd, the developer of the project and the second defendant, Loulach Steel Pty Ltd, the builder (together, “Loulach”).

4. [4]

   Originally, the Owners Corporation’s claim was based upon alleged breaches of the statutory warranties implied into the relevant building contract by the Home Building Act 1989 (NSW).

5. [5]

   The Owners Corporation now seeks to amend its Technology and Construction List Statement to add a claim relying on an alleged breach of the statutory duty of care created by s 37 of the Design and Building Practitioners Act 2020 (NSW) (the “DBP Act”).

6. [6]

   Section 37 of the DBP provides:

7. [7]

   I will refer to this as the “Statutory Duty of Care”.

8. [8]

   Section 39 of the DBP Act provides:

9. [9]

   Section 41 of the DBP Act provides, relevantly that:

10. [10]

    The Owners Corporation’s application to amend its claim to incorporate a claim under the DBP Act has been on foot for over a year.

11. [11]

    On 23 October 2020, the Owners Corporation filed a Notice of Motion seeking leave to file and serve a Second Further Amended List Statement incorporating the DBP Act claim.

12. [12]

    That motion was listed before Henry J on 27 November 2020.

13. [13]

    On that occasion her Honour directed that the Owners Corporation serve:

14. [14]

    There were delays in the preparation of the Scott Schedule, for reasons with which I need not presently deal. Ultimately, a Scott Schedule was served on 17 September 2021. The Scott Schedule identifies 451 defects in the development.

15. [15]

    The Owners Corporation has also now circulated its proposed Second Further Amended Technology and Construction List Statement.

16. [16]

    In the proposed List Statement, the Owners Corporation articulates a claim under the DBP Act as follows:

17. [17]

    Paragraph 16 of the List Statement referred to in pars 19G and 19H is in the following form:

18. [18]

    The proposed List Statement makes no reference to the Scott Schedule, although argument before me proceeded on the basis that the List Statement and the Scott Schedule should be read together.

19. [19]

    Loulach opposes leave being granted to the Owners Corporation to plead [1] its Statutory Duty of Care case this way, contending that while there can be no dispute as to the existence of the Statutory Duty of Care, a pleading in the form proposed leaves the question of breach of that duty “wholly unarticulated”.

20. [20]

    Mr Weinberger, for the Owners Corporation, submitted it was sufficient for the Owners Corporation to identify the defects complained of and to contend that those defects themselves bespoke a breach of the s 37 duty.

21. [21]

    Thus, Mr Weinberger submitted:

22. [22]

    In effect, Mr Weinberger’s submission was that the mere fact that there was a defect in the building which was shown to constitute a breach of the Home Building Act statutory warranties established that the defect was the result of a breach by the builder of the statutory duty of care.

23. [23]

    I do not agree.

24. [24]

    A number of examples expose the difficulty with this approach.

25. [25]

    Item 223 in the Scott Schedule identifies as a defect:

26. [26]

    Thus, this allegation is that defective cladding had been installed “throughout” the complex.

27. [27]

    It will be Loulach’s case that the cladding type was selected by the architect. In those circumstances, and assuming in the Owners Corporation’s favour, that the cladding does not comply with requisite standards, what is the breach of duty alleged?

28. [28]

    Is it that:

29. [29]

    Another, admittedly less dramatic, example is item 22 in the Scott Schedule which identifies a defect as follows:

30. [30]

    What is the breach of duty alleged that has caused the “corrosion” referred to?

31. [31]

    Is it:

32. [32]

    A further example is item 176 in the Scott Schedule which identifies the defect:

33. [33]

    What is the breach of duty that is said to have led to this alleged defect?

34. [34]

    Is it that:

35. [35]

    The DBP Act was enacted to alleviate the need for a party like the Owners Corporation to prove a duty of care owed to it by the Builder. This reform was seen as being needed in light of the building failures at Opal Tower and Mascot Tower and High Court decisions in cases such as Brookfield Multiplex Ltd v Owners Corporation Strata Plan 61288 [2] and Woolcock Street Investments v CDG Pty Ltd [3] in which the High Court found that builders and engineers did not owe a duty of care to subsequent purchasers of commercial property.

36. [36]

    The DBP Act was not intended to provide a shortcut as to the manner by which a breach of such duty might be established.

37. [37]

    This is made clear by the following passage from the Second Reading Speech for the Design and Building Practitioners Bill 2019 (NSW), made by the Minister on 23 October 2019:

38. [38]

    The passage I have emphasised is reflected by the facts that:

    1. (1)

       as I have said, the relevant part of the DBP Act is expressed to be subject to the Civil Liability Act; and

    2. (2)

       there is no provision in the DBP Act stating that the mere fact of a defect establishes breach.

39. [39]

    Section 5B of the Civil Liability Act provides:

40. [40]

    In Garzo v Liverpool/Campbelltown Christian School, [5] Meagher JA said:

41. [41]

    More recently, in Sergienko v AXL Financial Pty Ltd, [6] Ward CJ in Eq cited with approval the following observations made by Garling J as the trial judge in Garzo v Liverpool/Campbelltown Christian School: [7]

42. [42]

    These authorities establish that a plaintiff alleging a breach of duty of care by a builder, and this must include a breach of the Statutory Duty of Care, must identify the specific risks that the builder was required to manage, and the precautions that should have been taken to manage those risks.

43. [43]

    It is not sufficient simply to assert a defect and allege that the builder was required to take whatever precautions were needed to ensure that the defect not be present.

44. [44]

    It may be, in this case, that the requisite degree of specificity can be achieved by causing the List Statement to refer to the Scott Schedule and revising the Scott Schedule to add further columns identifying, in relation to each defect, the relevant risk and, more importantly, exactly what the Owners Corporation contends Loulach should have done in relation to that risk.

Conclusion

1. [45]

   I decline to grant the Owners Corporation leave to amend its List Statement in the form proposed.

2. [46]

   I propose to allow the Owners Corporation one further opportunity to formulate an Amended List Statement.

3. [47]

   The parties should confer and agree on a timetable to enable that to occur.

4. [48]

   As to costs, if the parties cannot agree, they should agree on a timetable for short written submissions. I will deal with that question on the papers.