The Owners - Strata Plan No. 98970 v Capitol Property Services Pty Ltd ACN 140 517 632

1. [1]

   These proceedings concern the design and construction of a luxury strata development in Neutral Bay.

2. [2]

   The plaintiff owners corporation (OC) claims under the Home Building Act 1989 (NSW) (HBA) and the Design and Building Practitioners Act 2020 (NSW) (DBPA) against the first defendant builder, Capitol Property Services Pty Ltd, and second defendant developer, Lotus Fund No 9 Pty Ltd.

3. [3]

   Capitol Property is in liquidation and has not participated in the proceedings.

4. [4]

   On 21 June 2025, Lotus filed a list response denying the OC’s contentions. Lotus has not filed any evidence in relation to the claim and does not intend to.

5. [5]

   On 15 November 2023, Lotus filed a cross-claim seeking contribution from various subcontractors engaged in the development.

6. [6]

   On 27 February 2026, the OC filed a motion seeking summary judgment against Lotus in relation to the HBA claim. Lotus has not served any evidence opposing the motion and has indicated that it will not serve any evidence in the proceedings. The OC does not press its DBPA claim in this summary judgment application.

7. [7]

   For the following reasons, judgment for the OC against Lotus will be entered.

Is summary judgment appropriate?

1. [8]

   Uniform Civil Procedure Rules 2005 (NSW) (UCPR) r 13.1 empowers the Court to give summary judgment for the plaintiff if the plaintiff can establish evidence of the facts basal to the claim and evidence that, in the belief of the person giving the evidence, the defendant has no defence to the whole or part of the claim nor to the amount of any damages claimed.

2. [9]

   The real issue is whether there is an underlying cause of action or defence; this diverges on whether there is more than a “‘fanciful’ prospect of success” or whether the outcome is “so certain that it would be an abuse of the process of the court to allow the action to go forward”, but does not require an assessment of the claim’s prospect of success: O’Brien v Bank of Western Australia [2013] NSWCA 71 at [3] (McFarlan JA) (O’Brien).

3. [10]

   Powers to summarily terminate proceedings must be exercised with exceptional caution: see O’Brien at [55] (McFarlan JA) and [24] (French CJ and Gummow J).

4. [11]

   The OC must establish that it is entitled to the benefit of the statutory warranties contained in and extended by ss 18B, 18C and 18D HBA and substantiate the quantum of the damages sought.

5. [12]

   Section 18B HBA contains six warranties that are implied into “every contract to do residential building work” by the holder of a contractor licence. While Lotus is not the holder of a contractor licence, s 18C HBA extends those warranties to the successor in title to a developer who has done residential building work.

6. [13]

   In its List Response, Lotus admits that the OC is entitled to the benefit of the statutory warranties contained in s 18C HBA against Lotus, to the extent the development constituted “residential building work”.

7. [14]

   That term is defined in cl 2 of Sch 1 HBA and in CN1 Pty Ltd v NSW Self Insurance Corporation [2025] NSWSC 1464, Kirk J considered at [36] that broadly, it meant any work involved in “undertaking, co-ordinating or supervising the construction of a dwelling” or, inter alia, altering, repairing or adding to a dwelling.

8. [15]

   I am satisfied that the development, which is an apartment complex containing 13 residential lots, is a dwelling for the purposes of cl 3 of Sch 1 HBA and that the work the subject of the claim is residential building work.

9. [16]

   Therefore, I consider that the OC has the benefit of the statutory warranties contained in Part 2C HBA.

10. [17]

    The OC also relies upon s 18D HBA. In its List Statement, it pleads that:

11. [18]

    In circumstances where the OC seeks summary judgment against Lotus, the developer, I do not consider this assists the OC.

12. [19]

    In circumstances where Lotus has no positive defence to the claim, and its’ List Response pleads only bare denials in relation to OC’s HBA claim, I am satisfied that Lotus does not have a defence, and cannot succeed: General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 at 128-129 (Barwick CJ).

13. [20]

    The usual measure of damages for defective building work is the reasonable cost of rectification, giving the plaintiff the “equivalent of a building … which is substantially in accordance with the contract”: Bellgrove v Eldridge (1954) 90 CLR 613 at 617 (Dixon CJ, Webb and Taylor JJ).

14. [21]

    The OC seeks damages of $7,891,869.26, plus interest, relying on a “cost breakdown” prepared by Mr Tim Bean, director of PMSA Projects Pty Ltd, a project management and building consultancy engaged by the OC in relation to the development’s rectification:

15. [22]

    Mr Bean’s cost breakdown relies on the tender scope of remedial works and the tender submission by SBM (Structural Building Management). The OC has subtracted the sum of $251,980.36 from the cost breakdown, being the amount previously spent by the OC on legal costs to 20 February 2026. These costs are sought pursuant to a gross sum costs order, considered below.

16. [23]

    I am satisfied that the sum sought by the OC is the likely cost of rectifying the defective building work.

17. [24]

    The OC advanced three alternative claims for pre-judgment interest pursuant to s 100 Civil Procedure Act 2005 (NSW) (CPA).

18. [25]

    The first fails as it sought interest on sums that the OC has not yet expended, overclaiming the amount. The second was withdrawn.

19. [26]

    I accept the OC’s third claim, which seeks $86,268.03 in pre-judgment interest, based on a calculation of interest on the ex-GST amount of each individual invoice making up the total of $321,291.99 in out-of-pocket costs, from the date of each invoice.

Costs

1. [27]

   The OC seeks a gross sum costs order on an indemnity basis.

2. [28]

   An order for indemnity costs is not to punish an unsuccessful party for pursuing a case that fails, but to compensate a successful party fully for costs incurred, when the Court finds it was unreasonable for the other party to have subjected the successful party to the costs expenditure: Hamod v New South Wales (2002) 188 ALR 659 at [20] (Gray J, Carr and Goldberg JJ agreeing). The Court considers whether there was a relevant delinquency on the part of the unsuccessful party: Cabport Pty Ltd v Marinchek (No 2) [2013] NSWCA 131 at [6] (Meagher and Barrett JJA and Tobias AJA).

3. [29]

   While the OC failed to advance any specific submissions as to why an indemnity costs order was justified, I consider that the conduct of Lotus in these proceedings warrants such an order.

4. [30]

   I consider that the conduct of Lotus, in filing a List Response denying the OC's HBA claim when it did not have a defence to the claim and then failing to file any evidence in the proceeding warrants an indemnity costs order. Lotus' conduct has caused the OC significant delay and wasted cost expenditure. Lotus could have simply not filed a List Response, which would not have prejudiced its ability to bring a cross-claim against its subcontractors. This would have enabled the OC to seek default judgment, saving further cost and expense.

Is a gross sum costs order appropriate?

1. [31]

   The principles concerning the discretion to award a gross sum costs order under s 98(4)(c) CPA are well known: see eg Hamod v New South Wales [2011] NSWCA 375 at [813]-[820] (Beazley JA, Giles and Whealy JJA agreeing) (Hamod NSWCA).

2. [32]

   Factors relevant to the exercise of the discretion include the capacity of the unsuccessful party to satisfy any costs liability, the complexity of the proceedings in relation to their cost, and the desirability to avoid the expense and delay associated with a contested costs assessment: Hamod NSWCA at [816]-[817].

3. [33]

   The Court may adopt a “broad brush” approach to quantification: Harrison v Schipp (2002) 54 NSWLR 738 at 743 (Giles JA). That may involve an “impressionistic discount of the costs actually incurred or estimated, in order to take into account the contingencies that would be relevant in any formal costs assessment”: Hamod NSWCA at [820].

4. [34]

   I am satisfied that a gross sum costs order is appropriate in the circumstances. The proceedings have been long and protracted, and directing the parties to engage in the costs assessment process would cause further expense and delay.

5. [35]

   The OC first instructed its lawyers on 9 September 2020 and have incurred legal costs of $251,980.36 to December 2025.

6. [36]

   The hourly rates for the partner, associate and counsel in the proceedings are $690, $680 and $540 per hour (ex GST) respectively. I consider that these rates are reasonable, and further that the quantum of costs across this five-year period are appropriate.

7. [37]

   The OC has discounted the $251,980.36 by 10% for solicitor’s costs and 5% for counsel’s fees to account for the contingencies of costs assessment, as it seeks a gross sum costs order on the indemnity basis.

8. [38]

   I consider it appropriate to award the OC $225,000 for its costs incurred to December 2025.

9. [39]

   The OC also seeks $64,000 for unbilled work in progress and anticipated legal costs to the end of the matter.

10. [40]

    It has allowed $11,120 for a one day summary judgment hearing, and $24,600 for 2 days’ preparation in relation to that hearing.

11. [41]

    The summary judgment application was determined on the papers and as such, I do not consider it appropriate to order any costs for that work.

12. [42]

    Removing these amounts and applying a broad brush approach, I consider $28,000 an appropriate amount for unbilled work in progress and future costs, noting this application was unopposed.

Orders

1. [43]

   I make the following orders:

   1. (1)

      Judgment for the Plaintiff against the Second Defendant in the sum of $7,891,869.26.

   2. (2)

      Interest in the sum of $86,268.03.

   3. (3)

      Indemnity costs in the gross sum of $253,000.