The Owners - Strata Plan No 95242 v Karimbla Properties (No 42) Pty Ltd

This case represents an example of how proceedings in the Technology and Construction List should not be conducted.

The plaintiff is an Owners Corporation in relation to a large strata development in Zetland known as the “Symphony”. The development contains 223 units and common property.

These proceedings were commenced on 21 April 2023.

The first and second defendants are the developer and builder of the project. They are both members of the Meriton group. The third to fifth defendants are subcontractors for the builder.

Extraordinarily, although the proceedings have been on foot for 20 months, no orders have yet been made for any of the defendants to file a List Response.

Instead, multiple orders have been made for the service by the plaintiff of evidence and the proceedings have been stood over on a large number of occasions from Friday to Friday.

The Owners Corporation served its evidence in October and November 2023, being reports from general building, waterproofing, hydraulic, fire safety and structural experts.

Those reports related to the inspection by those experts of only some of the 223 units in the development. Three of the experts inspected approximately half of the units and the other expert inspected approximately a quarter of the units.

Nonetheless, in correspondence sent on 8 September 2023, a short time before the reports were served, the solicitors for the Owners Corporation proposed an adjournment “to finalise and concurrently serve all expert reports on the active defendants”. (Emphasis added.)

There was no hint then that the reports that the Owners Corporation then proposed to serve, and did subsequently serve, would be otherwise than all the evidence on which it would rely.

After service of the final report, being that of the Owners Corporation’s structural engineer, the solicitor for the Meriton parties, Ms McMillan, requested the Owners Corporation solicitors to prepare a Scott Schedule “for ease of both outlining the defects claimed by the plaintiff and for the defendants to respond to the plaintiff’s evidence, including to use the schedule in negotiations”.

On 29 November 2023, Ms McMillan wrote to the Owners Corporation’s solicitors asking, “When should we expect to receive your client’s Scott Schedule?”

The Owners Corporation’s solicitors replied on 4 December 2023:

The Owners Corporation’s solicitors’ statement in that email that “the evidence is not finalised” must have been a reference to the fact that the defendants’ evidence was not then served, as there was no suggestion in the correspondence at that time that the Owners Corporation was proposing to serve further evidence.

On 11 April 2024, Ms McMillan wrote to the Owners Corporation’s solicitors referring to discussions earlier that day and asked the Owners Corporation’s solicitors to confirm “if your client intends to serve further evidence-in-chief and, if so, when”, and asking “when will we obtain the Scott Schedule?”

The Owners Corporation’s solicitors replied on 17 April 2024:

On 24 April 2024, the Owners Corporation’s solicitors served on the solicitors for the defendants a Scott Schedule. The Scott Schedule is not before me, but I am told it is a detailed document that contains a reference to over 4000 defects.

The covering email said:

On 7 May 2024, Ms McMillan, responding to a proposal as to orders to be made in these proceedings said, “[p]rior to agreeing to the proposed orders, my client requires confirmation that your client’s evidence-in-chief has been served in its entirety”.

The Owners Corporation’s solicitors replied later that day:

The Owners Corporation’s “formal position” was ultimately set forth in an email sent to the defendants on 14 June 2024.

That email annexed letters from each of the Owners Corporation’s four experts opining that the defects that each had identified in their 2023 reports were likely to be systemic and prevalent in the uninspected units.

The email also stated:

That email makes clear that the Owners Corporation’s solicitors and the Owners Corporation then understood the incomplete nature of the evidence it had served and that it would need to make a decision as to whether to supplement that evidence. It also shows that the Owners Corporation’s solicitors were entertaining a hope that discussions could take place, but that the whole question was “subject to our client’s final instructions”.

The next piece of correspondence before me is an email sent by the Owners Corporation’s solicitors to the other parties on 29 July 2024 proposing a further eight-week adjournment of the proceedings and stating that “we are still awaiting the responses from the Defendants in respect of the Plaintiff’s Scott Schedule, as well as the correspondence provided from our client’s experts”.

However, there is no evidence before me that the Owners Corporation’s solicitors were taking any steps to cause such discussions to take place. It does appear that the matter was left to drift.

On 23 September 2024, the Owners Corporation’s solicitors wrote to the parties:

Again, a further eight-week adjournment was proposed with no suggestion of there being further steps taken to have further discussions.

On 16 October 2024, there was a general meeting of the Owners Corporation and a resolution was passed to “proceed with further expert determination”.

In his affidavit of 22 November 2024, the solicitor for the Owners Corporation, Mr Russell, states:

In those circumstances, the Owners Corporation now seeks the following orders:

The reason why the Owners Corporation seeks until 30 September 2025 to serve its further evidence is set out in Mr Russell’s affidavit as follows:

What is absent from the evidence before me is an explanation from the Owners Corporation as to why it was that a decision was taken to serve evidence over a year ago based on an inspection of between a quarter and a half of the units in the building, and why it is only now that the belated decision has been taken to seek to conduct a more wide-ranging investigation of the defects said to exist in the building.

What I have set out above shows how unsatisfactory the matter has proceeded.

I accept that, if as the Owners Corporation evidently fears, there are defects throughout the building of the same nature as are alleged to be present in the units that have been inspected, it has a serious case to advance against some or all of the defendants.

What the merits or otherwise of that case will be remains to be determined.

It appears that, at the time the Owners Corporation’s expert evidence was served over a year ago, those advising the Owners Corporation thought that it would be sufficient to serve expert reports based on inspection only of a proportion of the units of the building. That was a forensic choice that was then made by the Owners Corporation as advised by their legal representatives.

Although, as I have said, there is no evidence before me providing an explanation for this, there has evidently been a change of heart by those advising the Owners Corporation, and a decision made that the question of the defects in the uninspected units cannot be left as a matter of inference, but must be proven.

This is, to repeat, most unsatisfactory.

Mr Sirtes SC, who appears for the Meriton parties, put the matter this way:

I see substance in those submissions.

However, despite the unsatisfactory manner in which this case has proceeded, it would not, in my opinion, be just to shut out the Owners Corporation from seeking to establish a case it now proposes. If the Owners Corporation is correct in apprehending that the alleged defects already identified are prevalent throughout the building, there is evidence before me suggesting that the costs to rectify those defects could be as high as $8 million. That is, obviously, a serious matter for all the parties, but the Owners Corporation must, in my opinion, be given an opportunity to establish such a case that, if successful, would have such an impact on all the unit owners.

I propose to make orders to the effect proposed by the Owners Corporation save that I propose to direct that any further evidence be adduced by 6 June 2025. Against the possibility that this target proves unable to be achieved, I will make orders to the effect that, if the experts retained by the Owners Corporation advise it that the 6 June 2025 deadline cannot be met, then, by 28 May 2025, the Owners Corporation should serve and provide by email to my Associate evidence and submissions as to what further time the Owners Corporation ought reasonably have to complete service of its evidence. In that regard, I propose to list the matters for directions on 30 May 2025.

Further, there must be some terms on which those orders are made. The first will be a term to the effect that the expert evidence to be adduced by the Owners Corporation may only be adduced in relation to units not yet inspected by the Owners Corporation’s experts and is to be confined to defects in those uninspected units which are to the same effect as those which allegedly exist in the units that have already been inspected, with a view to establishing the extent to which the defects identified in the inspected units are prevalent also in the uninspected units.

There must also be a consequence as to costs. I propose to order that the Owners Corporation pay the defendants’ costs thrown away by the making of these orders and to invite the defendants within a reasonable time to serve and provide by email to my Associate short submissions and evidence as to the costs actually thrown away to date. I will deal with that evidence as soon as I can with a view to making an order that the Owners Corporation pays those costs forthwith.

I also propose to make orders for the filing by the defendants of their List Responses and any Cross-Claims.

I invite the parties to confer and agree as to the orders necessary to give effect to these reasons.