Kapila v Monument Building Group Pty Ltd

1. [1]

   These proceedings concern a dispute regarding the construction of additions and alterations to a terrace house at 48 XXXX Street, Paddington, Sydney (the Property) pursuant to a building contract entered into on 23 August 2015 in the standard form published by NSW Fair Trading (the Contract). The name of the street in the Property’s address will be referred to as ‘King Street’ and the lane at the rear as ‘King Lane’ throughout the judgment for privacy reasons.The parties to the Contract are the plaintiff, Dr Shrutti Kapila, as ‘owner’, and the first defendant, Monument Building Group Pty Ltd (MBG), as ‘builder’. MBG holds a contractor licence issued under the Home Building Act 1989 (NSW) (HBA). The second defendant, Mr Miles Brujic (Mr Brujic), was the sole director of the first defendant, and the nominated supervisor under MBG’s contractor licence as required by the HBA at all relevant times.

2. [2]

   The plaintiff claims damages against MBG for breach of contract for defective work, and also damages in respect of the same defective work against Mr Brujic for breach of his duty of care to the plaintiff under s 37 of the Design and Building Practitioners Act 2020 (NSW) (DBPA).

3. [3]

   As pleaded in the amended statement of claim filed on 24 September 2021 (ASOC) there are seven alleged defects, comprising two on the lower level and five above, which are listed below with the reference given to each one in the ASOC and the Scott Schedule (CB 499):

   1. (1)

      on the garage level:

   2. (2)

      on the upper levels:

4. [4]

   In closing submissions counsel the plaintiff informed the Court that the electrical work claim (SS#6.4) was not pressed.

5. [5]

   The plaintiff was represented at the hearing by Mr J Mack of counsel and the defendants by Mr C Robinson of counsel.

6. [6]

   In these reasons the Environmental Planning and Assessment Act 1979 (NSW) and the Environmental Planning and Assessment Regulation 2000 will be referred to as the EPA Act and the EPA Regulation respectively.

Pleaded claims

1. [7]

   By the ASOC, the plaintiff pleads two causes of action against MBG. The first is that the defects involved acts or omissions of MBG which were a breach of clauses 2, 3 and 9 of the Contract. The second is that MBG carried out ‘construction work’ at the Property within the meaning of s 37 of the DBPA, that it owed a duty of care to the plaintiff as owner of the property within the meaning of s 37(2) of the DBPA and that by reason of the ‘water issues’ and ‘install issues’ it breached that duty. However, in closing submissions Mr Mack said that the claim against MBG under s 37 of the DBPA was not pressed.

2. [8]

   In the case of Mr Brujic, the plaintiff relies solely on an alleged breach of s 37 of the DBPA. The plaintiff pleads that Mr Brujic was the nominated supervisor under MBG’s contractor license, that he carried out ‘construction work’ at the Property within the meaning of s 37 of the DBPA, that he owed a duty of care to the plaintiff as owner of the Property within the meaning of s 37(2) of the DBPA and that by reason of the ‘water issues’ and ‘install issues’ he breached that duty.

3. [9]

   The ‘water issues’ are said to be the failure of the defendants to waterproof (a) the planter boxes on the balcony; (b) the garage level new concrete walls (gym/cellar-eastern, southern and western walls); (c) the internal staircase from the garage-western side of the property; (d) the garage level brick walls-garage; and (e) build the kitchen level-western and eastern side walls to prevent water entering into the property and into the walls (ASOC, [45F]).

4. [10]

   The ‘install issues’ are said to be the failure to properly install (a) the roof and skylights; (b) electrical work; and (c) the box gutter outside the master bedroom on the western side (ASOC, [45G]). As noted above, the electrical work claim is no longer pressed.

5. [11]

   The ASOC also includes a claim in negligence against both defendants but in closing submissions Mr Mack said that this was not pressed.

6. [12]

   The ASOC does not bring a claim for breach of the warranties in s 18B of the HBA. In the original statement of claim there was such a claim but it is ruled through in the ASOC. It may be inferred that this is because cl 9 of the Contract includes express warranties in the same terms as s 18B.

7. [13]

   By the amended defence filed on 19 June 2023 (AD), the defendants (1) admit that the Contract contained the express terms relied on by the plaintiff but deny the alleged defects amounted to a breach of those terms; (2) in relation to the claim under the DBPA against Mr Brujic, admit that he was the sole shareholder of MBG, held a contractor licence and was the nominated supervisor of MBG, but deny any breach of s 37 of the DBPA.

8. [14]

   In addition to the denial of liability, the AD also pleads two further defences. The first is that if the defendants are liable for any loss or damage due to ingress of water to the garage level of the property, the claim against each of them is an ‘apportionable claim’ under Part 4 of the Civil Liability Act 2002 (NSW) (CLA): AD, [41]-[55]. The AD identifies four alleged ‘concurrent wrongdoers’ for the purposes of s 35 of the CLA, being (a) Mr Ball of DM Ball & Associates who was the certifying authority (PCA) for the development, (b) Ross Engineering which prepared the engineering drawings, (c) Amores Design which prepared the architectural drawings, and (d) Shreeji Consultants which prepared engineering drawings to remove the deep soil planter box: AD, [55]. All of the alleged ‘concurrent wrongdoers’ were appointed by the plaintiff rather than MBG.

9. [15]

   Secondly, the AD pleads that there should be a reduction in the defendants’ liability under s 37 of the DBPA as a result of the plaintiff’s contributory negligence regarding the waterproofing and drainage of the garage level works, in particular with regard to the wall which is known as ‘RW1’ and removal of the deep soil planter box: AD, [63].

10. [16]

    The conduct relied on for the contributory negligence defence is: (a) the plaintiff contracted with MBG to use Xypex as the waterproofing solution in the construction of the garage level boundary walls; (b) the plaintiff failed to inform the defendants that the proposed construction of the garage level was other than construction of a class 10.a structure under the National Construction Code; (c) the plaintiff failed to provide the defendants with a copy of the development consent conditions imposed by either the council or the Land and Environment Court for the development of the Property, in particular that it was a condition that the garage level the ‘tanked’; (d) the plaintiff refused and failed to instruct her architect or structural engineer to amend the design of the development at RW 1 to allow an alternative method waterproofing to Xypex to be installed; (e) the plaintiff failed to take account of advice provided to her by Martens Consulting Engineers in their report of September 2013 to the effect that retaining walls be constructed to allow backfill to the boundary for adequate drainage; (f) the plaintiff failed to take the advice provided by her nominated building consultant, Mr Paul Cavallo, on 24 February 2016 concerning the responsible engineer undertaking engineering design, inspection and certification and the caution that the builder is not an engineer; and (g) the plaintiff instructed Shreeji Consultants to remove the deep soil planter box shown in the original architectural drawings, and directed the defendants to construct the development accordingly, which adversely affected the drainage of water from the property: AD, [56]-[63].

11. [17]

    It follows that the issues for determination are:

    1. (1)

       whether the alleged defects constituted a breach by MBG of the Contract;

    2. (2)

       whether Mr Brujic breached s 37(1) of the DBPA by reason of the ‘water issues’ and the ‘install issues’;

    3. (3)

       if a relevant breach occurred, whether the defendants can rely on Part 4 of the CLA;

    4. (4)

       whether in the case of the claim against Mr Brujic for breach of s 37(1) of the DBPA, the defence of contributory negligence is made out;

    5. (5)

       what damages, if any, are payable.

Evidence

1. [18]

   The plaintiff relied on lay evidence comprising two affidavits made by her and two affidavits made by Mr John Kantouros, a civil and structural engineer who is a director and senior engineer at Ross Engineers, a structural engineering firm engaged by the plaintiff for the purposes of the project. Both of them were cross-examined.

2. [19]

   The defendants relied on lay evidence comprising two affidavits of Mr Brujic and one affidavit of his wife, Georgina Brujic (Mrs Brujic). Both of them were cross-examined.

3. [20]

   On the question of liability for the defects the parties relied on the following expert evidence:

   1. (1)

      The plaintiff relied on the expert evidence of Mr David Hall, a building consultant, and Mr David England, a civil and structural engineer. Mr Hall provided two reports and Mr England provided one. They each contributed to a joint report with the defendants’ experts and gave concurrent evidence.

   2. (2)

      The defendants relied on the expert evidence of Mr Chris Bulmer, a building consultant, and Mr Peter Blacker, a civil and structural engineer. Each of them provided a written report, contributed to the joint expert report and gave concurrent evidence.

4. [21]

   On the question of damages, the plaintiff also relied on the expert evidence of Mr Ken Whyte, a quantity surveyor, who provided one report. Mr Whyte was not required for cross examination. A schedule setting out his calculation of damages is included later in these reasons.

Approach to evidence

1. [22]

   Adverse credit findings were not sought by any party. However, the plaintiff submitted that the Court should place little or no weight evidence of Mr Brujic in his affidavit dated 1 July 2022 regarding numerous conversations between him and each of the plaintiff, Mr Kantouros, Mr Ball (the PCA) and his wife.

2. [23]

   Given the lengthy passage of time between when those conversations occurred (in 2014 and 2015) and the time when his affidavit was prepared I have borne in mind the well-known observations of McLelland CJ in Eq regarding the fallibility of human memory in Watson v Foxman (1995) 49 NSWLR 315 at 318:

3. [24]

   The risk of reconstruction is particularly acute in circumstances where the relevant witness has been in litigation on the matters about which they give evidence (which is the case here both in these proceedings and earlier proceedings in NCAT). In Crouch v Hooper (1852) 16 Beav 182 at 184-185; 51 ER 747 at 748, Sir John Romilly MR said:

4. [25]

   It is for these reasons that it is accepted that reliable contemporaneous documents generally furnish the most reliable source of evidence as to what occurred or, at the very least, provide a generally reliable reference point from which to assess the reliability of witness testimony: Effem Foods Pty Ltd v Lake Cumbeline Pty Ltd (1999) 161 ALR 599; [1999] HCA 15 at [15]-[16]; Et-China.com International Holdings Ltd v Cheung (2021) 388 ALR 128; [2021] NSWCA 24 at [25]-[29] (and cases there cited).

5. [26]

   Bearing these principles in mind, where there was a dispute in the lay evidence as to conversations I have placed primary reliance on the extent to which the evidence is corroborated by contemporaneous documents, the objective surrounding facts and the apparent logic of events: Fox v Percy (2003) 214 CLR 118; [2003] HCA 22 at [31].

6. [27]

   In certain cases, as explained below, I have not accepted the evidence of Mr Brujic and his wife as to important disputed conversations. I did so not on the basis that they were dishonest in their evidence but rather because I consider that their recollections of events were distorted by the passage of time or perhaps altered by ‘unconscious bias, wishful thinking or by over much discussion of it with others’. As Lord Pearce said in Onassis v Vergottis [1968] 2 Lloyd’s Rep 403 at 431:

7. [28]

   I note also that when the law requires the proof of any fact the Court must feel an actual persuasion of its occurrence or existence before it can be found, and ‘it cannot be found as a result of a mere mechanical comparison of probabilities independently of any belief in its reality’: Briginshaw v Briginshaw (1938) 60 CLR 336 at 361; [1938] HCA 34 per Dixon J.

Background

1. [29]

   The plaintiff lodged a development application (DA) with Woollahra Municipal Council (Council) in 2013 for a proposed renovation of the Property. The DA was rejected by the Council. A principal reason for the Council’s decision was the failure of the proposal to provide any private open space or deep soil landscape area due to the construction of an extension at the rear of the terrace to accommodate a cellar and gym/storage area, which would remove the open space between the existing house and the existing double car garage. After the Council rejected the application, the plaintiff appealed to the Land and Environment Court.

2. [30]

   On 22 August 2014 the Land and Environment Court made orders granting the DA on conditions, following a successful conciliation conference between the plaintiff and the Council (Development Consent). The conditions of consent comprise Annexure A to the orders of the Land and Environment Court made on 22 August 2014 (Consent Conditions). Condition A.3 provides that the plaintiff must carry out all work and maintain the use and works in accordance with the plans and supporting documents listed in the condition, which include the stamped architectural drawings prepared by the plaintiff’s then architects, CVMA Architects, which had been revised from the plans previously submitted to Council (CVMA plans). The principal elements of the plans which had changed was the inclusion of a deep soil planter box which was to penetrate the first floor terrace above the garage, and also the garage slab below, and the reduction of the height of the roof terrace above the garage by 255mm to provide better privacy for neighbouring properties.

3. [31]

   The supporting documents listed in condition A.3 also include a geotechnical report dated September 2013 provided by Martens Consulting Engineers which, at paragraph 1.2, describes the work involved in the proposed development as including ‘demolition of existing stairs within the garage’ and ‘excavation ranging from approximately 2.60-3.30 m deep (includes 200 mm allowance for concrete slab and footing) to extend the garage level and make way for a cellar and gym/storage and accompanying new stairs’. One of the recommendations in the report (at paragraph 3.6) in relation to retaining walls was as follows:

4. [32]

   Another condition relevant to the present dispute is condition C.8 (Condition C.8) which provides relevantly:

5. [33]

   This condition is relevant to the work to be done on the garage level at the rear of the Property which faces onto King Lane. The stamped CVMA plans annexed to the Consent Conditions show the lower level facing King Lane as having two distinct areas. First, a tandem parking space that accommodates two cars. Second, beyond the parking spaces, there is a separate area that serves as a gym, cellar, and lift well, and internal staircase (on the western side) to access the next level living room of the Premises. The below is an extract from the stamped plans (CB1242, with street names altered for privacy reasons):

6. [34]

   It can be seen from this plan that the cellar and gym/storage areas were to be created by excavating land below the kitchen and living area shown on the plan and were, relevantly, in an area which was underground at the time the consent was obtained. The area between the part marked ‘gym/storage’ and the existing garage is where the ‘deep soil planter box’ was intended to be installed.

7. [35]

   Following the excavation necessary to create the area shown as ‘cellar’ and ‘gym/storage’ it was necessary for three retaining walls to be constructed which are shown on the engineering drawings prepared by Mr Kantouros as ‘RW1’ and ‘RW2’, (RW being an acronym for ‘retaining wall’). RW1 comprises two separate retaining walls: one on the eastern side (adjoining 50 King St) (RW1 East) and another on the western side (adjoining 46 King St) (RW1 West). RW1 therefore refers to two separate retaining walls. RW2 is the “retaining wall” on the southern/rear end of the Property where the cellar is located, and there is only one RW2.

8. [36]

   The below photograph (at CB 1607) shows where RW1 East, RW1 West and RW2 were built following the excavation:

9. [37]

   RW1 East is described by Mr Brujic in his affidavit evidence as a ‘rock face wall’.

10. [38]

    RW1 West is a smooth ‘concrete face wall’. The concrete wall to which it faces was constructed by Mr Brujic, not as part of the Contract, but rather, when he constructed 46 King St prior to entry into the Contract. RW1 West serves as an internal wall for the living room and internal staircase of the Premises and also accommodates the electrical wiring for the lights installed on the staircase.

11. [39]

    Set out below are extracts from the approved plans which show the requirement for an ‘approved waterproof membrane’ on RW1 (east and west) and RW2 (CB1338) to the full height of each wall. RW2 also includes an ‘A.G line’ but no ‘A.G line’ is on RW1 because it is a tanked wall on the boundary.

12. [40]

    On 2 September 2014 there was a meeting at the Property attended by the plaintiff, her architect (Mr Alex Chougam of CVMA Architects) and Mr Brujic to discuss the build, and on 5 September she forwarded to Mr Brujic a copy of the approved CVMA plans (which were unstamped but in the same form as the stamped plans) with a request that he provide a quote for the work.

13. [41]

    Mr Brujic deposed that in the meeting on 2 September 2014 the following exchange occurred:

14. [42]

    The plaintiff does not recall the conversation, or the words attributed to her by Mr Brujic, which is not surprising given the passage of time. In particular, she deposed that she had no recollection of Mr Brujic referring to the Xypex product at the meeting, which would have meant nothing to her at that time, although she did recall that during her conversations with him throughout the build, Mr Brujic used the word ‘watertight’ when referring to the walls for the gym/cellar and she deposed that ‘Miles certainly did not mention or ever warn me that there would be any chance of the gym/cellar flooding by using Xypex as it does now’.

15. [43]

    On 14 September 2014, Mr Brujic sent an email to the plaintiff attaching a quote to do the work for $680,000 plus GST (MBG quote). The quote set out a summary of the scope of the project which included the statement that ‘Basement level allowed for concrete walls and floor slab with zypecs waterproofing (Not polished concrete) floor covering to be advised not priced’. The words ‘zypecs waterproofing’ was intended to be a reference to Xypex which is a concrete waterproofing additive.

16. [44]

    On 10 January 2015, the plaintiff and her husband met with Mr Brujic and his wife to discuss the MBG quote. Mr Brujic deposed in his affidavit of 1 July 2022 that he and the plaintiff had the following conversation during this meeting:

17. [45]

    Mrs Brujic deposed in her affidavit of 5 July 2022 to a similar version of the conversation in so far as the references to Xypex are concerned. The plaintiff does not deny that the meeting occurred but she deposed that she had no recollection of what was said in the conversation, in particular any discussion regarding Xypex.

18. [46]

    In early 2015, the plaintiff changed architects and engaged Mr Alan Amores of Amores Design to prepare the construction drawings necessary to obtain a construction certificate. Amores Design provided a set of drawings on around 5 May 2015 which were based on the approved CVMA plans (Amores drawings). It was the Amores drawings which were annexed to the Contract and were the basis for the construction certificate.

19. [47]

    In April 2015, the plaintiff engaged consulting engineers, Ross Engineers, to prepare construction drawings necessary to obtain the construction certificate. For this purpose, the plaintiff provided Ross Engineers with copies of the CVMA plans, the Amores drawings and the Consent Conditions.

20. [48]

    Mr Kantouros, a director and senior engineer at Ross Engineers, prepared these drawings which comprise two pages and are dated 29 June 2015 (RE Drawings). The RE Drawings, which refer to the need for an ‘approved waterproof membrane’ on RW1 and RW2, are central to the dispute in the proceedings, and are discussed below. Ross Engineers also issued a certificate of structural design adequacy dated 30 June 2015 (RE certificate) stating that the RE Drawings were in accordance with the Building Code of Australia (BCA) and other building codes identified in the certificate.

21. [49]

    On 1 July 2015, the plaintiff sent the RE Drawings to Mr Bujic by email and there followed discussions between the plaintiff and Mr Bujic regarding the building contract.

22. [50]

    Ultimately, on 23 August 2015 the plaintiff and MBG entered into the Contract under which MBG agreed to undertake renovation works at the Property for a contract price of $984,500 plus GST including certain PC items. A copy of the Amores drawings was attached to the Contract. The RE Drawings were not attached to the Contract but it is not in dispute that they formed part of the contract (see Defendants’ opening submissions at [13]).

23. [51]

    In late July 2015, the plaintiff had engaged Mr Darren Ball of DM Ball & Associates Pty Ltd as the private certifying authority for the project. He issued a construction certificate to the plaintiff on 8 September 2015 (Construction Certificate), which:

    1. (1)

       described the ‘development’ as ‘dwelling alterations & additions’;

    2. (2)

       identified the ‘building classification’ for the purposes of the BCA as:

    3. (3)

       identified the development consent to which it related as the Development Consent;

    4. (4)

       certified that the construction work would comply with the requirements of the EPA Regulation if completed in accordance with the plans and specifications referred to in the certificate, which comprised the Amores drawings, the RE Drawings and the stormwater drawings;

    5. (5)

       attached the documents which had been provided to Mr Ball by the plaintiff, including the Development Consent, the three sets of drawings referred to at (4) above, the RE certificate and two reports prepared by Martens Consulting Engineers (being a geotechnical and hydrogeological assessment and a geotechnical and hydrogeological monitoring program).

24. [52]

    On 11 September 2015, MBG commenced demolition works at the rear of the Property.

25. [53]

    On 14 September 2015 Mr Bujic sent an email to the plaintiff stating:

26. [54]

    The plaintiff’s evidence, which I accept, is that on the following day she delivered to Mr Brujic a set of documents attached to the Construction Certificate. She was not challenged on this in cross examination. This is confirmed by an email sent by Mr Brujic to the plaintiff on 16 September 2015 which states relevantly:

27. [55]

    The ‘report’ to which Mr Brujic refers in this email appears to be the report dated 24 August 2015 by Martens Consulting Engineers which was attached to the Construction Certificate and sets out requirements for a monitoring program pursuant to the Conditions. Mr Brujic denied in his affidavit dated 28 June 2023 that he received a copy of the Consent Conditions in the ‘CC package’ which he received from the plaintiff at this time.

28. [56]

    Although, in my view, ultimately nothing turns on when he received the Consent Conditions for the reasons explained below, I prefer the evidence of the plaintiff that she delivered them to him at this time particularly as (a) the email refers to vibration monitoring as a ‘requirement by the courts’ which suggests that he had read the Consent Conditions, and (b) he specifically asked in his earlier email of 14 September 2015 for the ‘full DA approval documentation from the land and environment courts’ which, read naturally, refers to the Consent Conditions as identified by the Construction Certificate itself, and there is no evidence that he subsequently told the plaintiff that he had not received them when the ‘CC package’ was delivered.

29. [57]

    On 30 September 2015, Mr Kantouros met with Mr Brujic at the Property to inspect the underpinning works to the adjoining terraces. There is a dispute as to what was discussed at this meeting. Mr Brujic’s diary note simply states ‘Ross Engineers turned up to inspect underpinning to number 50. All good will send us an email. Underpinning more in some areas. All good so far.’ In his affidavit dated 1 July 2022, Mr Brujic deposed that he had a conversation with Mr Kantouros about the RE drawings, referred to below.

30. [58]

    On 11 October 2015, there was a meeting between the plaintiff, husband, and Mr and Mrs Brujic at their home during which Mr Brujic gave the plaintiff an update as to the works up to that time. There is a dispute as to what was discussed at the meeting which is dealt with below.

31. [59]

    On 22 October 2015, Mr Kantouros attended the site to inspect the footings and placement of steel reinforcement on the garage level prior to the pouring of the concrete slab. He subsequently issued a certificate (dated 13 November 2015) expressed to be for ‘footings and slab steel reinforcement for lower ground floor)’ as follows:

32. [60]

    On 23 October 2015, Mr Ball attended the site to give approval for the concrete pour for the slab which occurred on that day.

33. [61]

    On 9 November 2015 MBG commenced the formwork for the construction of RW1 and RW2 and on 16 November 2015 Ross Engineers attended the site again to inspect and certified the placement of the steel reinforcement for those walls. Mr Kantouros subsequently issued a certificate (on 20 November 2015) expressed to be for ‘wall reinforcement for garage level concrete walls’ as follows:

34. [62]

    During the meeting on site on 16 November 2015, either Mr Kantouros (or his colleague) recommended that Mr Brujic should infill the walls in the garage area with additional bricks between the engaged peers to the existing walls to improve structural integrity and stability and effectively creating a solid brick wall where there were previously gaps. Following this the plaintiff gave an instruction for a variation to the original construction plan which ultimately lead to additional costs which were paid by the plaintiff.

35. [63]

    On 20 November 2015, MBG poured the concrete for RW1 and RW2.

36. [64]

    On around 22 February 2016 the plaintiff appointed Paul Cavallo (Mr Cavallo), a building consultant who conducted a business under the name ‘Independent Building Inspections’, to inspect the defendants’ work, during the build. Mr Cavallo attended the site on 23 February 2016 and provided a report to the plaintiff on 24 February 2016 (which she forwarded to Mr Brujic on 29 February 2016) reporting on the inspection and drawing a the plaintiff’s attention to some issues with the construction. The relevance of the report to the present proceedings is that in his covering email to the plaintiff, Mr Cavallo said: ‘I would make sure the Engineer is visiting regularly and has designed all structural components so far and is happy to give you a certificate on all areas constructed so far? The Builder is doing a good job but he’s not an Engineer so cover yourself and him by ensuring the Engineer visits regularly?’

37. [65]

    On 4 February 2016, plaintiff sent an email to an engineer, Mr Sumeer Gohil of Shreeji Consultants, attaching a diagram of a proposed redesign for the deep soil planter box in order to replace it with a shallower structure in the form of a steel ‘tub’. Mr Gohil prepared some plans to implement the design. The plaintiff had previously discussed this idea with Mr Brujic in September or October 2015. It appears that this change was implemented in around March or April 2016.

38. [66]

    On 15 June 2017, Mr Ball (as the PCA) issued an interim occupation certificate to the plaintiff. All of the building work was certified. The certificate adopted the same BCA classification as the construction certificate noted earlier: CB1927.

39. [67]

    Water leaks became evident from early 2017 were the result of the failure of the aged existing roof not having been replaced as part of the new build. This was explained to the plaintiff from an early stage both during and after completion of the works by the defendants. The plaintiff refused to take the defendants’ advice to replace or renovate the old roof or flashings to party walls.

40. [68]

    It was also propounded by experts engaged by the plaintiff that leaks were evidently due to water entry from the balcony level. The defendants upon inspection discovered an unexplained penetration through the terrace slab not created by the first defendant.

41. [69]

    On 26 March 2019 Mr Cavallo conducted a site inspection and provided a defect report to the plaintiff (which she forwarded to the defendants) which identified a number of defects including water ingress through the balcony terrace to the garage level below. The defendants agreed to undertake rectification works under the supervision of Mr Cavallo and a scope of works was agreed between the parties and Mr Cavallo.

42. [70]

    In November 2019 the plaintiff commenced proceedings in NCAT for the rectification of a waterproofing defect. This application was concluded when the parties reached agreement that the first defendant would undertake further works including rectification of certain defects, with further consideration to be paid to the first defendant by plaintiff.

43. [71]

    One matter which was agreed at the Tribunal not to form part of the proposed works to be undertaken, was the waterproofing of the first-floor planter boxes. The parties agreed that the plaintiff could appoint a building expert to identify a scope of works to be carried out by the first defendant, who would oversee and approve those works. Consent orders were made in NCAT giving effect to this agreement on 1 November 2019.

Disputed conversations during construction

1. [72]

   There are a number of disputed conversations regarding the use of Xypex rather than an approved waterproof membrane.

2. [73]

   The first is an alleged conversation on 30 September 2015 between Mr Brujic and Mr Kantouros during a site visit by Mr Kantouros to inspect the underpinning works for the concrete slab. Mr Brujic deposed that the conversation was to the following effect (references to ‘Miles’ and ‘John’ being to Mr Brujic and Mr Kantouros respectively):

3. [74]

   Mr Kantouros denies that he said the words attributed to him by Mr Brujic. His evidence was that he had no recollection of any conversation with Mr Brujic about approved waterproof membranes on RW1 and RW2. He accepts that he may have said that Xypex was a suitable product to add to concrete, but not that Xypex could be used as a substitute for a waterproof membrane.

4. [75]

   Mr Kantouros deposed that he had designed RW1 and RW2 to comply with the requirement for ‘tanking’ in Condition C.8., stating that ‘tanking’ means that ‘external water cannot enter the internal space’. He deposed that he regarded a waterproof membrane as a standard feature for a retaining wall, such as RW1, to achieve tanking and prevent water ingress and this was the reason he designed RW1 with an ‘approved waterproof membrane’. He deposed that he was aware when he designed RW1 that there were suitable products available in the market which could have been installed as per the drawings, including a product manufactured by companies such as Sika and other products described as ‘geo tech liners and ‘poly liners’, which were capable of being applied to a rockface wall such as RW1. This evidence is consistent with the evidence of the expert engineers referred to below. Mr Kantouros also deposed that had he been asked about a suitable waterproof membrane during construction he would have directed Mr Brujic to consult a licensed waterproofer. Mr Kantouros was not cross-examined on this evidence and I accept it.

5. [76]

   In addition Mr Kantouros gave detailed evidence in his affidavit as to his usual practice in a situation where a builder requested a change to his firm’s engineering plans, which was that he would not give off-the-cuff advice of this kind but rather would ask the builder to make a request by email indicating what the builder would like to change, which did not occur, and he would then undertake steps to ensure that the changes were within the architectural intent (including in this case that the area would be a moisture free space suitable for the designated purpose shown on the architectural plans). He was not cross-examined on that evidence.

6. [77]

   In cross examination, Mr Kantouros denied that he said ‘we can up the concrete strength to 40mpa’ because his view was that there is no engineering reason to change the mpa if Xypex is being added to the concrete.

7. [78]

   I prefer Mr Kantouros’ evidence on this conversation to that of Mr Brujic. First, Mr Brujic’s diary note for the meeting on 30 September 2015 set out earlier makes no mention of a discussion of Xypex or a waterproof membrane. It is unlikely that such a significant matter would not have been mentioned in the note had this discussion occurred.

8. [79]

   Secondly, when Mr Brujic was asked in cross-examination what was discussed in the conversation with Mr Kantouros about Xypex (T173), none of the words attributed to Mr Kantouros in the version above were recalled by him. I note that the only conversation with Mr Kantouros which Mr Brujic deposes to as involving a discussion about Xypex and a waterproof membrane is during the site inspection on 30 September 2015 and he makes no mention of any discussion of those topics during the site inspection on 22 October 2015.

9. [80]

   Thirdly, during either or both of the two site inspections of the garage level before the concrete slab was poured, being on 30 September 2015 and 22 October 2015, Mr Kantouros took photographs (Ex 4, pp 133 to 148). He accepted in cross examination that these photographs showed there was no waterproof membrane on RW1 or RW2 prior to the concrete pour of the ground floor slab or the walls themselves. However, he did not accept the proposition put to him that these photographs showed that structure he had drawn for a waterproof membrane in the RE drawings had not been implemented. This was because he considered that a waterproof membrane could still have been installed after the photographs were taken and before the concrete pour for the slab and walls took place (T84.12).

10. [81]

    He denied in cross examination that this meant it was likely that he had a conversation with Mr Brujic about the absence of a waterproof membrane. His evidence was as follows:

11. [82]

    Mr England in his oral evidence said that he would have expected that a structural engineer who attended to check the structural steel before the pouring of the concrete for the slab and walls to have noticed the absence of a waterproof membrane (T253.36). He was asked what he would expect the engineer to do in that situation and he responded: ‘If there was an alternate that’s been proposed by others, I think he would consider that as an alternate to what’s shown on the plans, knowing that he has to certify the works when they’re complete’ (T253.46).

12. [83]

    I am not satisfied that I should reject Mr Kantouros’ evidence as to what was discussed in the site meeting with Mr Brujic on 30 September 2015 based on Mr England’s evidence. At its highest, Mr England’s evidence would support an argument that Mr Kantouros failed to take a step he ought reasonably to have taken when observing the absence of a waterproof membrane shortly before the concrete pour of the walls.

13. [84]

    Fourthly, Mr Brujic accepted in cross examination that he did not understand after his conversation with Mr Kantouros on 30 September 2015 that he did not need to install a waterproof membrane (T175). This is consistent with his evidence in his affidavit of 1 July 2022 that on 1 October 2015 he asked Mrs Brujic to ‘look into waterproofing membranes for the boundary rockface walls and to look at Xypex options and qualified Xypex applicators’. Had he reached agreement with Mr Kantouros that no membrane was required why would he have asked his wife to investigate such a product?

14. [85]

    I note that there is no evidence from Mr Brujic or any other witness for the defendants regarding any other conversation with Mr Kantouros regarding the installation of waterproof membranes for RW1 or RW2 or the use of Xypex.

15. [86]

    The second alleged conversation was on Sunday, 11 October 2015 in a meeting at Mr Brujic’s home at which the plaintiff and her husband were present together with Mr Brujic and his wife. Mr Brujic deposed that the conversation was to the following effect (references to ‘Shruti’ being to the plaintiff):

16. [87]

    Mr Brujic deposes that his wife then gave the plaintiff a fact sheet on the Xypex product, and he then had a conversation with the plaintiff to the following effect:

17. [88]

    The plaintiff denies the words attributed to her. Mrs Brujic kept a handwritten file note of the meeting which relevantly states the following about the discussion regarding Xypex:

18. [89]

    There was no challenge to the veracity of the file note and I accept Mrs Brujic’s evidence that she made it during the meeting. This file note makes no mention of Mr Brujic telling the plaintiff in the meeting that he had spoken to Ross Engineers about the lack of access between the boundary wall and rock, that Ross Engineers had not specified the waterproof membrane or that ‘without access I don’t have many options’. Mr Brujic in cross examination could not recall any discussion on these matters at the meeting, nor could he recall what was said at the meeting about Xypex. Given the elapse of time since the conversation and when he prepared his affidavit (almost 7 years) and having observed him during the course of his evidence, I do not regard his recollection of the conversation as reliable except to the extent confirmed by the file note.

19. [90]

    I accept, based on the file note, that there was a discussion about the use of Xypex and that a copy of a product information sheet on Xypex was provided to the plaintiff at the meeting. However, neither the file note nor Mr Brujic’s version of the conversation, establishes that there was any discussion or agreement that Xypex would be substituted for a waterproof membrane.

20. [91]

    I have taken into account that the plaintiff’s husband attended the meeting and he did not give evidence. I accept that the inference should be drawn that his evidence as to the meeting would not have assisted the plaintiff’s case as to what was discussed at the meeting: Jones v Dunkel (1959) 101 CLR 298 at 320-321. However, that does not lead to the conclusion that I should accept Mr Brujic’s recollection beyond what is confirmed by the file note.

21. [92]

    As noted above, Mr Brujic stated in his affidavit of 1 July 2022 that on 1 October 2015 he asked his wife to ‘look into waterproofing membranes for boundary rockface walls’. Neither he nor Mrs Brujic gave evidence about the nature of the investigation done, or the outcome but in cross examination Mrs Brujic said that he had asked her to ‘make some phone calls in regards to an approved waterproof membrane’ and that after making ‘a couple of phone calls’ she created on her computer a list of ‘Xypex approved applicators’ and ‘waterproofing companies’ which she printed and handed to her husband. She said the list of ‘Xypex approved applicators’ included Reliable Trade Services (RTS), and that the list of ‘waterproofing companies’ included the names of three companies which she ‘believed … would have been Sika, Remseal and Ardex’, and the name of the relevant product (T119-122). She said she did only ‘basic research’, and that the existence of the list was not raised at the meeting. She also said the list could no longer be found.

22. [93]

    When Mr Brujic was asked about this matter in cross examination, he said that Mrs Brujic had told him that she could find ‘nothing that will stick to a rockface wall’ (T177.50) that the only person he spoke to about a waterproof membrane after speaking to his wife was ’Tony’ from RTS. RTS is the company which provided Xypex in the concrete mix. Mr Brujic gave the following evidence in cross examination of about his discussion with RTS (T178):

23. [94]

    No witness from RTS was called to give evidence and Mr Brujic could not recall the surname of the person he referred to as ‘Tony’. He could not name any other waterproofing companies he spoke to and said his wife had ‘already got their datasheets’ which she provided to him. However, apart from the Xypex date sheet, Mrs Brujic made no mention of obtaining datasheets from waterproofing companies.

24. [95]

    None of this evidence appeared in the affidavit evidence of either Mr Brujic or his wife. That is difficult to explain given that it is material to the claims brought against the defendants. It is also difficult to understand why, if these conversations had occurred, Mr Brujic did not mention them to the plaintiff in the meeting on 15 October (which he accepted he did not). I note also that Mr Brujic was in court when his wife was cross-examined. In all the circumstances I am not satisfied that the recollection of either Mr Brujic or his wife on this topic is reliable and I do not accept their evidence on it.

25. [96]

    The third alleged conversation is a telephone conversation between Mr Brujic and the plaintiff on around 13 October 2015. Mr Brujic deposed that he contacted Tony at RTS on that day to discuss the addition of Xypex to the concrete for the retaining walls and that Tony said ‘I can’t recommend a membrane for a rockface wall. Xypex is widely used in the industry in these situations. The 40 mpa would be added protection.’ Mr Brujic also deposes that following this he telephoned the plaintiff and had a discussion with the plaintiff in which he told her that RTS was ‘on-board for adding the Xypex to the concrete and adding the water stop’ and then deposed that the following exchange occurred:

26. [97]

    There is no contemporaneous record of this conversation nor any email following it up. The plaintiff denies this conversation occurred and specifically says that had Mr Brujic ever asked her to contact Ross Engineers she would have immediately done so, as she had on other occasions when design issues arose, including the redesign of the deep soil planter box. I accept the plaintiff’s evidence on this conversation and do not regard Mr Brujic’s recollection as reliable.

27. [98]

    The fourth alleged conversation is said to have occurred on 19 October 2015 at the Property between Mr Brujic and Mr Ball which Mr Brujic deposed was to the following effect:

28. [99]

    Mr Ball was not called to give evidence. Consistently with my earlier conclusion that Mr Brujic did not speak to Ross Engineering ‘about the waterproofing membrane application issue to RW1 and RW2’, I do not accept that Mr Brujic’s recollection of this conversation as reliable.

Terms of the Contract

1. [100]

   The Contract included the following terms.

2. [101]

   Clause 1 (headed ‘Contract documents’) provided:

3. [102]

   The ‘documents listed below’ include the Amores documents but do not include the Ross Engineering drawings. However, it was conceded by the defendants that the RE Drawings provided to MBG on 1 July 2015 formed part of the Contract. This concession is correct because they are referred to in the construction certificate and were ‘plans and specifications for work to be done under this contract’ and hence are taken to form part of the Contract by cl 1.

4. [103]

   Clause 2 provided:

5. [104]

   By cl 3(a) it was agreed that the contractor will:

6. [105]

   By cl 3(b) it was agreed that owner will pay the contract price in the manner specified in the contract. One of the annexures to the Contract is a document entitled ‘Monument Building Group Cost Sheet as at 15th August 2015’ which stated the ‘project breakdown to lock up’ comprising: (a) $680,000 (ex GST) for various specified ‘tasks’ on each level of the Property which included ‘waterproofing’ in relation to the ‘garage floor plan’, the ‘basement level’ (where the planter boxes were to be constructed on the terrace) and the ‘ground floor plan’, and (b) a further $215,000 (ex GST) by way an allowance for additional works/finishes and PC items, giving a total figure of $984,500 (incl GST). A note at the bottom of the page states that the quotation is based on the architectural and engineering drawings referred to in the construction certificate, which include the Amores drawings and the RE drawings.

7. [106]

   By cl 9 contained the following warranties by the contractor which are in the same terms as s 18B of the HBA:

8. [107]

   Clause 13 set out the requirement for variations to the Contract to be in writing, relevantly as follows:

9. [108]

   Clause 18 provided:

10. [109]

    By cl 20 a provision of or a right created under the Contract may not be varied except in writing signed by the parties.

Expert evidence regarding the design and waterproofing of RW1 and RW2

1. [110]

   As noted above, the parties relied on expert evidence of structural engineers (Mr England and Mr Blacker) and building experts (Mr Hall and Mr Bulmer) dealing with the design of RW1 and RW2 and in particular the reference to an ‘approved waterproof membrane’. This evidence goes to the failure of MBG to install any waterproof membrane on those walls; all he did was add Xypex to the concrete mix for the walls.

2. [111]

   While the report of the plaintiff’s engineering expert, Mr England, and the report of the defendants’ engineering expert, Mr Blacker, did not respond to the same questions, to a large extent their areas of disagreement were addressed in their concurrent oral evidence.

3. [112]

   All the experts participated in a joint report and gave concurrent oral evidence. In the joint report, they dealt with this issue in relation to the topic described as ‘6.5 Land and Environment Court condition for tanking’.

4. [113]

   Mr England expressed the opinion in his report that the construction of RW1 (both eastern and western) for the cellar and gym/storage area on the approved CVMA plans included in the Consent Conditions were required to be constructed on the side boundaries of the land, which was common for similar sites in the City of Sydney and Woollahra local government areas, and the location of those walls on the RE drawings was in accordance with those approved plans and the Conditions of Consent.

5. [114]

   Mr England expressed the following opinion on the meaning of ‘tanking’ Condition C.8:

6. [115]

   He expressed the opinion in his report, confirmed in his oral evidence, that the design of RW1 in the RE drawings was structurally suitable to perform as a tanked wall structure and prevent water ingress provided that the walls are constructed as shown in the RE drawings and the design of RW2 in the RE drawings was a tanked construction, that is a waterproof wall, which complied with Condition C.8 (T250.34 and T273.11).

7. [116]

   In response to a question whether the design of RW1 was capable of preventing water ingress if the walls were constructed as drawn on the RE drawings, Mr England said in his report:

8. [117]

   He expressed a similar view in relation to the design of RW2, stating that it is a waterproof wall designed in an identical manner to RW1. In other words, RW1 and RW2 were designed as waterproof walls.

9. [118]

   In response to a question whether there were membrane products available for sale on 29 June 2015 (the date of the RE drawings) that could achieve the design depicted in RW1 and RW2 he expressed the following opinion:

10. [119]

    In the joint report he said that Condition C.8 was ‘a standard condition in any such situation where there is a likely water issue. Tanking systems are regularly used. Rock can be sprayed-bituminous product for temporary waterproofing and then tanking installed…’ He maintained this view during his oral evidence (see the discussion of Mr Blacker’s evidence below).

11. [120]

    In his report, Mr Blacker responded to a question whether the reference to ‘approved waterproof membrane’ in the RE drawings was adequate, by noting that he was informed that the job was ‘construct only’ and continued:

12. [121]

    His answer then proceeds to observe that the waterstop as shown on the RE drawings was located in the wrong location (ie. on the negative side rather than the positive side of the wall) and that this was corrected by the builder in the course of construction. I note that Mr England agreed with Mr Blacker on this point in his oral evidence (T261). Ultimately, this is not relevant to the question whether an ‘approved waterproofing membrane’ was required to be installed.

13. [122]

    Mr Blacker’s report then goes on to observe that the builder provided Xypex as an additive to the concrete and increase the concrete strength to 40MPa from 25MPa noted for the slabs on the RE drawings, and that the builder encountered rock at a much higher level than expected which meant that there was nothing to which a waterproof membrane could be attached to. He expressed this opinion in his report as follows:

14. [123]

    In the joint report he said in relation to Condition C.8:

15. [124]

    The view expressed by Mr Blacker that there was some significance in the fact that this was a ‘construct only’ contract, which was taken up by Mr Robinson in his closing submissions, involves a transgression by him into what is essentially a question of law as to the obligations of the builder on the proper construction of the Contract, which I will deal with below. More importantly, so far as Mr Blacker was suggesting in his report and the joint report that the encountering of rock meant that a further instruction was required because the design of RW1 and RW2 as shown in the RE drawings could no longer be implemented, he resiled from this during his oral evidence.

16. [125]

    The issue came up in this way. Mr England had during his oral evidence said the following when asked to summarise his views on the Condition C.8 for tanking (T240):

17. [126]

    In this response he is referring back to what he said in his report (set out earlier) about the types waterproof membrane which could be affixed to a subterranean wall. He was then asked a specific question on the application to rock in the following exchange (T242) (emphasis added):

18. [127]

    Mr Blacker agreed with Mr England on this point in the following exchange:

19. [128]

    In both of his reports Mr Hall noted that the RE drawings showed an ‘approved waterproof membrane’ to extend the full height of the walls comprising RW1 and RW2, and expressed the opinion that the addition of Xypex to the concrete mix for RW1 and RW2 was not a waterproof membrane or a tanking system because Xypex is not a product that seals waterproof joins in concrete, and also while the Xypex datasheet refers to the product being suitable for cracks of up to 0.4mm he had measured the cracks on site at 0.5mm and above. Nor in his opinion did the installation of Bondek behind RW2 provide a waterproof system and that product had no benefit in resisting water entry to a building.

20. [129]

    In these reports, Mr Hall gave two examples of products available at the time of construction of RW1 and RW2 to provide a waterproof membrane system. The first was a PVC sheet membrane waterproofing system provided by Remseal, which according to the datasheet provided by Remseal is suitable for retaining walls and tanking, and involves the application of watertight PVC material typically 1.5mm thick over a surface which can be seen welded to form any shape and size to form a complete vertical waterproofing system behind the concrete wall. The second was a product manufactured by Sika called Sikaplan WP 1100-30 which comes in sheet form and can be ‘welded’ at the laps and joins to form a fully sealed tanking system. This was the same Sika product mentioned by Mr England in his report. Mr Hall expressed the view that both products would have been a suitable waterproofing membrane to comply with Condition C.8 and the RE drawings.

21. [130]

    In the joint report Mr Hall said in relation to Condition C.8:

22. [131]

    Mr Hall did not resile from his position in his oral evidence. He identified the Sika product referred to above as a type of waterproof membrane that Mr Blacker referred to in his oral evidence set out above to provide ‘a fully tanked system and you wouldn’t get water in’ (T277).

23. [132]

    In his report Mr Bulmer disagreed with Mr Hall as to the appropriateness of Xypex for waterproofing RW1 and RW2. He said:

24. [133]

    He expanded on the significance of the fact that the two walls comprising RW1 were designed to be located on the boundary with the adjacent properties (46 and 50 King Street) rather than being internally offset from the boundary, thus in his view preventing the installation of a waterproof membrane behind the concrete wall in the following passage of his report:

25. [134]

    In the joint report Mr Bulmer said:

26. [135]

    I do not accept Mr Bulmer’s view that MBG followed the design as detailed by the structural engineer. The RE drawings required the application of an ‘approved waterproof membrane’ to RW1 and RW2. It is clear from the evidence that the addition of Xypex to the concrete mix for those walls is not a waterproof membrane. Mr Brujic did not seek approval from Mr Kantouros or anyone else for a waterproof membrane for those walls in order to implement the design in the RE drawings. This is despite the ‘note’ appearing on the RE drawings close to where the ‘approved waterproof membrane’ for RW1 and RW2 is designed stating ‘if site conditions vary from plan or if in doubt consult engineer’.

27. [136]

    Mr England’s oral evidence, which I accept, was that the reference to ‘approved waterproof membrane’ was explicable because at the time of creating the RE drawings, the designer (Mr Kantouros) would not have known what kind of membrane was required given the uncertain nature of the rock to be excavated (T253). In my view, the ‘note’ on the RE drawings was a clear indication to Mr Brujic that he should consult with Ross Engineers to clarify what kind of waterproof membrane was appropriate. This is consistent with Mr Blacker’s acceptance in his oral evidence that ‘if there is a problem on-site, you would expect the builder to communicate with the relevant professional, whether it’s an engineer or a waterproofer, if there is any doubt’ (T267.36). In this instance, Mr Brujic did not do so.

28. [137]

    I accept the evidence of Mr England and Mr Hall, and that of Mr Kantouros referred to earlier, that it was possible to install a waterproof membrane on RW1 and RW2, such as the Sika product mentioned by them in their evidence. I find that it is likely that had Mr Brujic asked Mr Kantouros for approval of that product or another similar product suggested by a licensed waterproofer, that Mr Kantouros would have approved its use on RW1 and RW2.

Issue 1: breach of contract claim

1. [138]

   The breach of contract claim relates to the following alleged defects:

   1. (1)

      water ingress on the garage level (SS#6.2 and 6.7) (Defect 1);

   2. (2)

      the planter box on the terrace (SS# 6.1) (Defect 2) ;

   3. (3)

      the roof and skylights (SS#6.3) (Defect 3);

   4. (4)

      the box gutter (SS#6.5) (Defect 4);

   5. (5)

      walls to living room (SS#6.8) (Defect 5);

2. [139]

   There are 2 separate alleged defects on the garage level: first, water ingress through RW1 and RW2 in the area marked ‘cellar’ and ‘gym/storage’ on the plans; and secondly, water ingress through the new walls constructed in the area marked ‘garage’ on the plans. The first of these is the largest claim in terms of quantum and complexity (the damages claimed being $152,123 for the first and $10,459 for the second).

Preliminary issues

1. [140]

   The parties identified a number of preliminary issues relevant to this claimed defect which are: (a) the building classification of the garage level; (b) client side project management; (c) the builder’s awareness of the excavation and water issues; (d) what Condition C.8 for ‘tanking’ required. I will address these first before considering whether the claim is made out.

2. [141]

   This issue was originally raised by the building experts and comes about because of the designation of the development works in the construction certificate as ‘Dwelling alterations & additions-class 1a; Garage alteration-class 10a’. There was a disagreement between Mr Hall and Mr Bulmer as to whether the entire garage level was classified as 10a (Mr Bulmer’s view) or only that part which was for use as a garage (Mr Hall’s view).

3. [142]

   The context in which this issue arises is as follows. Under the Contract, MBG is required to comply with the performance requirements of the BCA. This obligation arises in various alternative ways. First, cl 2(1)(c) requires MBG to comply with the ‘conditions of any relevant development consent’ and the Consent Conditions require the work to be carried out in accordance with the requirements of the BCA (Condition E.1(a)). Secondly, cl 9(c) (and s 18B(1)(c) of the HBA) requires the work to be done in accordance with, and comply with, the HBA or any other law; ‘any other law’ includes s 80(11) of the EPA Act and cl 98(1)(a) of the EPA Regulation, under which it was a condition of a development consent that the building work performed pursuant to the development consent must be carried out in accordance with the requirements of the BCA: see Owners SP 92450 v JKN Para 1 Pty Limited [2023] NSWCA 114 at [20].

4. [143]

   The relevant version of the BCA is the 2015 version Volume Two published by the Australian Building Codes Board which contains the performance requirements for Class 1 and Class 10 Buildings.

5. [144]

   Part 1.2, cl 1.2.1 provided that ‘every part of a building must be constructed in an appropriate manner to achieve the requirements of the Housing Provisions, using materials that are fit for the purpose for which they are intended’. The expression ‘Housing Provisions’ was defined to mean ‘the requirements for Class 1 and 10 buildings contained in Volume Two of the Building Code of Australia as published by the Australian Building Codes Board’.

6. [145]

   Part 1.3 dealt with the classification of buildings and provided relevantly:

7. [146]

   The BCA defines (a) ‘fire-resisting’ (in relation to a structural member or other part of the building) to mean having the fire-resistance level required for that structural member or other part, and (b) ‘private garage’ to mean any garage associated with a Class 1 building or any separate single story garage associated with another building where such garage contains ‘not more than 3 vehicle spaces’ (BCA, Part 1.1, cl 1.1.1).

8. [147]

   A note forming part of Figure 1.3.3 (which is referred to in cl 1.3.2) states that ‘a Class 10 building may be attached to a Class 1 building’ and this is illustrated by Figure 1.3.3 which shows a Class 10a carport attached to a Class 1 building (a house).

9. [148]

   Part 2 of Volume Two contains the construction requirements for Class 1 and 10a buildings. Those relating to ‘Damp and Weatherproofing’ are contained in Part 2.2 which provided relevantly:

10. [149]

    Relevant provisions of the EPA Act include: (a) s 109C(1)(b) which provided that a construction certificate is ‘a certificate to the effect that work completed in accordance with specified plans and specifications will comply with the requirements of the regulations referred to in s 81A (5)’; (b) s 109H(3)(c) which provided that an interim occupation certificate must not be issued to authorise a person to commence to occupy or use a partially completed new building unless ‘the partially completed building is suitable for occupation or use in accordance with its classification under the Building Code of Australia’; and (c) s 81A(5) which provided that the EPA Regulation may make provision concerning the issue of certificates for the erection of buildings and the subdivision of land.

11. [150]

    Clause 147(1)(f) of the EPA Regulation provided that a construction certificate must contain, relevantly, ‘the classification (in accordance with the Building Code of Australia) of the building to which the certificate relates’.

12. [151]

    In the present case, Mr Ball (as the PCA) issued a construction certificate and an interim occupation certificate which identified the building classification for the purposes of the BCA as ‘Dwelling alterations & additions - Class 1a; Garage alteration - Class 10a’.

13. [152]

    In my view, the proper interpretation of these certificates read in the light of the provisions of the BCA dealing with building classification, is that the area marked ‘cellar’ and ‘gym/storage’ on the plans is classified as Class 1a and the area marked ‘garage’ on those plans is classified as Class 10a, for the following reasons.

14. [153]

    First, this is the natural reading of the two certificates because, as is apparent from the plans, the development has two elements: (a) the making of alterations and additions to an existing dwelling, and the area marked ‘cellar’ and ‘gym/storage’ on the plans lies immediately beneath the existing dwelling and is properly described as an addition to that dwelling which is classified as Class 1, and (b) the alteration of an existing garage, and that is what is classified by the words ‘garage alteration’ as Class 10a.

15. [154]

    Secondly, the class of a building or part of a building is required to be determined by reference to the purpose for which it is designed, constructed or adapted to be used (BCA, cl 1.3.1). A Class 1 building comprises a single dwelling which is one of a group of attached dwellings which are not located above or below another dwelling. The area marked ‘cellar’ and ‘gym/storage’ on the plans forms part of the single dwelling, being immediately below existing terrace and connected to the rest of the terrace by stairs which make it part of that terrace. Contrary to Mr Robinson’s submission (T418), the ‘garage’ which is being ‘altered’ is the space marked ‘garage’ on the plan, which does not include the new areas marked ‘cellar’ and ‘gym/storage’.

16. [155]

    On the other hand, a Class 10 building is ‘a non-habitable building being a private garage, carport, shed or the like’. The expression ‘non-habitable’ is not defined, and has its ordinary meaning. The word ‘habitable’ means ‘suitable or good enough to live in’ (Oxford English Dictionary, online ed). In light of this ordinary meaning, an area for use as a gym would not be regarded as ‘non-habitable’ because it is designed to be lived in, albeit intermittently, for the purposes of exercise by the occupants of the dwelling. Nor is such an area ‘like’ (ie similar to) a garage, carport or shed: see also Hatch v Northern Beaches Council [2019] NSWLEC 1422 at [102]-[104] where Acting Commissioner Bindon held that gymnasiums are ‘habitable rooms’ within the meaning of the BCA. In my view, the area marked ‘cellar’ and ‘gym/storage’ is not a ‘non-habitable building’ within the meaning of the BCA.

17. [156]

    This conclusion reflects Mr Hall’s view. Mr Bulmer took the view that the entire garage level was a Class 10a building, which he summarised in the Joint Report as follows: ‘As there is no natural light and ventilation included in the design of the rear of the garage, that area is not considered habitable as defined by the BCA. The Private Certifier has defined this space as Class 10A being a non-habitable building’. In his oral evidence he mentioned two matters in support of his view (T224).

18. [157]

    First, the cellar and gym/storage areas had no natural light or ventilation and so were regarded as non-habitable spaces for the purposes of the performance requirements of cl F2.2.4 and cl F2.2.5 of the BCA. He considered that this view was supported by the construction certificate which he interpreted as assigning to the entire garage level classification of Class 10a. I do not agree with Mr Bulmer that the construction certificate supports his view, or that cl F2.2.4 and cl F2.2.5 of the BCA support his view. These provisions of the BCA provide:

19. [158]

    The expression ‘habitable room’ is defined in cl 1.1.1.2 to mean

20. [159]

    There is a recognition in this definition that a Class 1a building may have rooms which are either habitable or non-habitable. It is only rooms of the first kind which are required (by cl F2.4.4 and cl P2.4.4) to have adequate natural light. As regards ventilation, a space in a Class 1a building is required (by cl F2.4.5) to have adequate ventilation consistent with its function or use, and may have adequate ventilation for its use or function despite being underground and hence having no direct ventilation to outside air (see cl P2.4.5).

21. [160]

    The second matter raised by Mr Bulmer in support of his view is cl 1.3.3 of the BCA set out earlier (being that where not more than 10% of the floor area of a Class 1a building is used for a purpose which is a different classification, the classification of Class 1 may apply to the whole building). Mr Hall considered that this supported his view given the floor space occupied by the ‘cellar’ and ‘gym/storage’ area compared to the rest of the building. Whether that is the case or not, cl 1.3.3 does not support Mr Bulmer’s view because it merely provides that the Class 1 classification may apply to part of a building used for a purpose falling within a different classification if it represents no more than 10% of the floor area of the Class 1 building. It would not operate to give the space designated as ‘cellar’ and ‘gym/storage’ area a Class 10a classification if that was not otherwise the appropriate classification under the BCA.

22. [161]

    As a consequence of the classification as Class 1a of the area shown on the plans as ‘cellar’ and ‘gym/storage’ the construction work for that area was required to comply with performance requirements P2.2.1, P2.2.2 and P2.2.3 of the BCA set out earlier.

23. [162]

    The classification of the area marked ‘garage’ as Class 10a means that: P2.2.1(a) and (c) applied to that area (but not P2.2.1(b) where ‘in the particular case there is no necessity for compliance’); P2.2.2(b) (but not P2.2.2(a)) applied to that area; and P2.2.3 did not apply to that area unless ‘in the particular case there is no necessity for compliance’. Critically, P2.2.2(b) requires that an external wall must prevent the penetration of water that could cause ‘undue dampness or deterioration of building elements’.

24. [163]

    This issue was first raised by Mr Bulmer in his report in which he expressed the view that through the design and construction of the Property the plaintiff did not put in place an externally appointed client-side project manager and in effect she performed that role as evidenced through a number of communications between her and Mr Brujic where he requested clarification of the detail of the design documentation and the like. Mr Bulmer’s view was that managing the consultants involved in the project required adequate project management experience and skill which the plaintiff did not have and she did not assign adequate time to manage the project at large and to close out requests from Mr Brujic in a timely, thorough and professional manner.

25. [164]

    Mr Hall’s view was that the Contract did not require a project manager. He said that the plaintiff had provided the required professional documents for the building work to proceed and that if the builder, based on his experience, found issues with documents provided then he should have made the plaintiff aware of those issues and sought written instructions. Absent the builder raising any issues in writing with the plaintiff on the documentation provided, it followed that the builder was satisfied that the documents were adequate to proceed and complete the building works.

26. [165]

    The defendants in their closing submissions sought a finding that the plaintiff herself engaged as the project manager of the development at the Property and drew attention to the following evidence: (a) the plaintiff appointed Mr Ball as the principal certifying authority and later appointed Mr Cavallo of Independent Building Inspectors to oversee the quality of the works undertaken by MBG; (b) the plaintiff did not update the engineering design for the works to take account of the requirements of Condition C.8 after the RE Drawings were provided to the defendants or respond to an email from Ross Engineers proposing a geotech/hydrological engineer to be appointed for the purposes of that condition; (c) the plaintiff directed changes in the works to remove the deep soil planter box and instead install a tub style planter box which she designed (which ultimately was concreted over and re-tiled at the request of the plaintiff during the works resulting from the plaintiff’s NCAT proceedings); (d) Mr Cavallo reminded the plaintiff in February 2016 that MBG was not an engineer and the appointed engineer should have designed all structural components and be inspecting and certifying the works regularly; (e) the plaintiff had provided to Mr Ball when he requested documents pertinent to the Consent Conditions the letter dated 7 January 2014 from Martens to the plaintiff which had been prepared by Martens at the request of the plaintiff in order to overcome the Council’s requirement for a deep soil planter box (an application which was unsuccessful) but this was not a document relevant to the Consent Conditions.

27. [166]

    I accept that the plaintiff did not appoint a ‘project manager’ for the project. Indeed, the Contract does not contemplate that there would be a project manager. However, it does not follow that the plaintiff should be categorised as a ‘project manager’ as that is not a role contemplated by the Contract and I am not satisfied that it is necessary or appropriate to make the finding sought by the defendant. Rather, what the defendants need to establish is that the conduct relied on is relevant in some way to their defence against claims of the plaintiff that there has been a breach of the provisions of the Contract or the statutory warranties.

28. [167]

    This issue was raised by Mr Hall who expressed the view in his second report that Mr Brujic had received geotechnical and hydrogeological reports prepared by Martens for both 46 King Street (when he had owned it with his wife) and the Property which should have made him aware of the water issues at the rear of the Property relevant to the excavation to be undertaken on the garage level of the Property. In closing submissions, the plaintiff did not rely upon Mr Hall’s opinion.

29. [168]

    The defendants in closing submissions submitted that the evidence is that the walls constructed in the renovation works for 46 King Street were set back from the boundary and proper drainage was installed and hence was different to the design for the garage level at the Property. Their submission was that to the extent that Mr Brujic was aware of any water issues, the Court should find that he discharged his duty to the plaintiff by bringing to her attention the shortcomings of the engineering and architectural design and offered to solutions from which the plaintiff made her choice. The submissions made in support of that contention are addressed below.

30. [169]

    The context in which this issue arises is that Condition C.8 set out earlier requires that the plans and specifications to be submitted to the certifying authority for the purposes of obtaining the construction certificate must be accompanied by civil and structural engineering details prepared by a professional engineer ‘for foundation retaining walls, footings, basement tanking, and subsoil drainage systems, as applicable’, which must be certified by the professional engineer to, relevantly (emphasis added):

31. [170]

    It is clear from the CVMA plans (which were the approved plans for the purposes of the Development Consent) that the area shown as ‘cellar’ and ‘gym/storage’ on the garage level would need to be created by excavation below ground level and hence the retaining walls for that area (being RW 1 and RW 2) would be below ground level. This can be seen from the extract from one of those CVMA plans set out at [33] above. In light of this, the natural reading of paragraph (d) of Condition C.8 is that engineering drawings were required to provide ‘tanking’ of those retaining walls.

32. [171]

    The evidence of Mr Kantouros referred to earlier is that he prepared the RE drawings to comply with this condition by including the ‘approved waterproof membrane’ for both RW 1 and RW 2 shown above to achieve the required tanking of those walls. This is consistent with the evidence of Mr England referred to earlier that paragraph (d) of Condition C.8 was a standard condition where there is a likely water issue and that the design of RW1 and RW2 was suitable to perform as a tanked construction and consistent with a tanked construction. I accept that evidence.

33. [172]

    The Construction Certificate issued by Mr Ball operated as a certification that if the work was completed in accordance with the specified plans and specifications (being relevantly the Amores drawings and the RE drawings) it would comply with Condition C.8(d): s 81A(2) and s 109C(1)(b) EPA Act, reg 145 and 146 of the EPA Regulation.

34. [173]

    It follows that MBG was required to construct a ‘tanked’ structure for RW1 and RW2 in accordance with the RE drawings which were prepared in that way in order to comply with Condition C.8(d).

35. [174]

    Mr Robinson, for the defendants, submitted that Condition C.8(d) only applied indirectly to the builder because what it required was that the drawings provide for ‘tanking’ and the builder’s obligation was to follow the drawings prepared to satisfy that requirement. I accept that submission, as far as it goes, but do not accept the following further submissions he made in respect of Condition C.8(d).

36. [175]

    First, Mr Robinson submitted that there was no detail for ‘tanking’ on the RE drawings and that Mr Kantouros accepted this in cross examination. In my view, that misstates Mr Kantouros’ evidence. What he accepted (at T63.37) was that there was no detail other than the reference to a waterproof membrane, not that there was no detail at all. What was absent from the RE drawings was detail as to the nature of the ‘approved’ membrane. I have noted earlier the explanation for why that detail was not included.

37. [176]

    Secondly, Mr Robinson submitted that Mr England had accepted in his oral evidence that the waterproof membrane was not a necessary feature for a tanked design and also said that the garage walls constructed are ‘adequate to meet the tanking requirement’. The part of Mr England’s oral evidence relied on for the submission is the following exchange between Mr Robinson and Mr England (T250-251) (emphasis added):

38. [177]

    In my view Mr Robinson misstates the effect of Mr England’s evidence. First, Mr England does not deny that a waterproof membrane was a necessary feature for the design of RW1 and RW2. Quite the contrary; both in this passage and in his evidence referred to earlier, he identifies the waterproof membrane as an element of the tanked system which had been designed. Secondly, I do not accept that in the above passage he accepted that ‘the garage walls constructed are adequate to meet the tanking requirement’. The highlighted part of his evidence set out in the above passage was prefaced by a question from Mr Robinson referring to the ‘white pillars’ in the garage area of the existing garage (not the new area where RW1 and RW2 were constructed). There was no requirement for tanking for those garage walls. Mr Robinson then directs Mr England to what he said in his report about ‘it’ being an adequate structure for tanking, adding ‘that is, the current walls that have been built by Monument Building Group’. Put in this way, the question is confusing as Mr England does not say in his report that the walls ‘that have been built’ by MBG were an adequate structure for tanking. I have set out earlier what Mr England said in his report on this issue which is directed at the design of RW1 and RW2 and not the walls as constructed. Having asked the question in a confusing way, I do not accept that the answer given by Mr England, in light of all his other evidence, was a reference to RW1 and RW 2 as constructed.

39. [178]

    Thirdly, Mr Robinson submitted that the reference to ‘below ground structures’ in Condition C.8(d) was to be understood as a reference to a statement made in an attachment to a ‘DA Guide’ prepared by Woollahra Council titled ‘Attachment 6 Guidelines for Geotechnical and Hydrogeological Reports’, which refers to ‘below ground structures’ as meaning the excavation to a depth greater than 300mm below the existing groundwater level, for excavations within 900 mm of the boundary’. However, this document was published in April 2015 which is after the Development Consent, and the defendants failed to establish that it is relevant to the construction of the Conditions.

Whether the claimed defects on the garage level are made out

1. [179]

   As noted above, there are 2 claimed defects in relation to the waterproofing on the garage level. The first relates to the construction of RW1 and RW 2, and the second relates to the construction of new garage walls in the area shown in the plans as the existing garage.

2. [180]

   There were two elements to the design of RW1 and RW2 which related to tanking, being a waterproof membrane and a water stop.

3. [181]

   In relation to the water stop, the experts were in agreement that the RE drawings incorrectly showed the water stops on the negative side of the wall rather than the positive side (ie. the side where the water is coming from), but that MBG did install them on the correct side (T264-266). There was a difference in view between Mr England and Mr Blacker as to whether the water stop had been installed incorrectly adjacent to the steel formwork rather than being encased in the concrete slab (Mr England thought it had been installed directly adjacent to the steel whereas Mr Blacker said it appeared to him based on the photographs in evidence that it had been installed ‘an adequate manner’). In light of this evidence, the plaintiff has not established that there was a failure to properly install the water stops.

4. [182]

   The real issue which arises is whether the failure to install a waterproof membrane to RW1 and RW2 is a breach of the Contract. In closing submissions, Mr Robinson accepted that the defendants had not complied with the RE drawings to the extent that there was no waterproof membrane (T425.12). However, he submitted that there was no breach of contract because ‘the defendants actually discharged their duty to the plaintiff by pointing out that the drawing as prepared by her engineer was impossible, and offering solutions, of which she took one’ (T427.18). In amplification of this submission, Mr Robinson said (T425):

5. [183]

   There are a number of elements to this submission: (1) that the application of a waterproof membrane was ‘simply impossible’ in the circumstances, relevantly that RW1 was a rock faced wall; (2) the defendants drew the plaintiff’s attention to this problem and offered her a solution, being the addition of Xypex to the concrete mix, which she approved and agreed before the works were actually undertaken (T425.25); (3) the breach of contract alleged against the defendants is the requirement that due care and skill be applied in constructing the works; and (4) the fact that there has been a departure from the strict compliance with the RE drawings for a practical reason falls within what is reasonable in terms of due care and skill.

6. [184]

   I will deal with each of these propositions in turn. As to the proposition (1), for the reasons already given the application of a waterproof membrane to RW1 and RW2 was not impossible.

7. [185]

   As to proposition (2), this can only be a reference to the meeting on 11 October 2015 between the plaintiff, her husband and Mr Brujic and his wife which I have dealt with above. At most, the plaintiff approved the use of Xypex but not the substitution of Xypex for a waterproof membrane. In any event, the discussion at the meeting could not amount to a variation of the Contract, which is how Mr Robinson sought to characterise the ‘approval’ which the plaintiff gave at this meeting. The Contract requires any variation to the Contract to be in writing, and there was no variation in writing so far as use of a waterproof membrane on RW1 and RW2 is concerned. In principle, the Contract could also be varied without writing provided that the variation was supported by consideration. This is because an unwritten variation of a contract would be a new contract (Commissioner of Taxation v Sara Lee Household & Body Care Australia Pty Ltd (2000) 201 CLR 520; [2000] HCA 35 at [22]) which would require consideration in order to be binding. No case was put that MBG provided consideration to the plaintiff for the variation of the Contract in respect of the absence of a waterproof membrane and there is nothing in the evidence to suggest any consideration was provided by MBG.

8. [186]

   As to proposition (3), cl 9(a) of the Contract (which replicates s 18B(1)(a) of the HBA) is not the only clause said to be breached. Clauses 2(1), 3(a) and 9(c) are also relied on, which are not premised on a failure to exercise due care and skill.

9. [187]

   As to proposition (4), I do not accept the premise on which it is put. The departure from the requirement for an approved waterproof membrane was not departed from for a ‘practical reason’. Rather, it was departed from because Mr Brujic failed to take reasonable steps to identify a waterproof membrane which could be used, or to consult with Mr Kantouros or an expert in waterproof membranes to identify such a membrane. The evidence referred to earlier establishes that such products did exist at the relevant time. The only person Mr Brujic spoke to about waterproofing RW1 and RW2 was ‘Tony’ from ATS and I am not satisfied that he was an expert in waterproof membranes. I am satisfied based on all the evidence that, as the plaintiff submitted, Mr Brujic did not seriously consider any method of waterproofing RW1 and RW2 other than using Xypex which had featured in his approach to waterproofing for the project from the very beginning, being part of this original quote referred to earlier.

10. [188]

    The Contract required MBG to install an approved waterproof membrane to RW1 and RW2 because that requirement appeared in the RE drawings which formed part of the Contract. This reflected the requirement contained in Condition C.8(d) of the Development Consent and also that waterproofing of the walls was obviously work required to be done on the garage level, as confirmed by the ‘costs sheet’ annexed to the Contract. That waterproof membrane was shown in the plans as extending to the full height of each wall. I am satisfied on the evidence that it was possible for a waterproof membrane to be installed on RW1 and RW2 in the manner required by the RE drawings.

11. [189]

    MBG did not install a waterproof membrane to those walls. Rather, it used a product, Xypex, which is a concrete additive and not a waterproofing membrane or an approved product for waterproofing for external walls under Australian Standard AS 4654. Under cl 3.8.1.3 of the BCA, that is the standard which sets out the requirements for ‘waterproofing membranes for external above-ground use’. While the RE drawings did not specify the particular ‘approved’ waterproof membrane to be used, MBG failed to take reasonable steps to identify a waterproof membrane which could be used and seek approval for that membrane from Ross Engineers which is the course it ought reasonably to have taken consistently with the ‘note’ on the RE drawings.

12. [190]

    The failure to install an approved waterproof membrane to RW1 and RW2 was a breach of of cl 2(1)(a) and cl 3(a) of the Contract. It was also a breach of cl 9(a) of the Contract because it was a failure to construct the walls with due care and skill and in accordance with the RE drawings.

13. [191]

    In addition, it was also a breach of each of cl 9(c) and cl 9(f) of the Contract because the work was not done in accordance with and did not comply with P2.2.2 and P2.2.3 of the BCA (paragraph (c)) and the use of Xypex, instead of a waterproofing membrane, was not reasonably fit for the specified purpose or result, being the waterproofing of the walls (paragraph (f)). For the purpose of these provisions, which reflect the warranties implied by s18B(c) and (f) of the HBA, it does not matter that MBG was not responsible for the design of RW1 and RW2: The Owners – Strata Plan No 68372 v Allianz Australia Insurance Ltd [2014] NSWSC 1807 at [75]-[76].

14. [192]

    As mentioned earlier, a structural enhancement was made to the existing brick walls in the garage following a meeting on site on 16 November 2015 between Ross Engineers and Mr Brujic. This part of the Property has a classification of Class10a and accordingly the work done by MBG was required to comply with cl P2.2.2(b) of the BCA. Mr Hall expressed the opinion in his reports, including by reference to photographs taken by him, that there was increased dampness in these walls compared to the position before the work started, in particular on the western wall, and water seepage which was explained by the lack of provision for drainage lines resulting in water ingress into the brick walls and the building works undertaken by MBG on the terrace level above. In addition, Mr England expressed the opinion that there was water leaking from the joint at the interface of RW1 and the new brick work in the garage area and there had been no attempt to waterproof that joint (T308.27). I accept the evidence of Mr Hall and Mr England and find that the lack of provision of drainage lines and the failure to properly waterproof the joint with RW1 constitutes a breach of cl 9(c) and cl 9(f) of the Contract.

15. [193]

    While there was no detail in the plans for the waterproofing for this work Mr Blacker agreed that a reasonable builder would refer this issue back to the architect and the engineer (T310.45) which did not occur.

Causation

1. [194]

   Where a breach of contract is established, the plaintiff must also establish that she has suffered loss as a consequence of the breach. The causal nexus required between the loss and the breach is that the breach was a material cause of the loss, with the question of causation determined by the application of a practical common sense approach: Alexander v Cambridge Credit Corporation Ltd (1987) 9 NSWLR 310 at 315, 350-351 and 357-8.

2. [195]

   Mr Hall was the only expert witness to address in a detailed way the link between the defects in the building work and the water ingress in the garage level. In his second report he summarised his view as follows (CB998):

3. [196]

   I accept his evidence in this passage, including his opinion that the agricultural pipe had been installed without the requisite fall. He made similar observations about the link between the defective garage level brick work and the water ingress at CB1006 which I also accept. I find that the defective installation of RW1 and RW2 and the defective brickwork in the garage area were a material cause of the water ingress in the garage level.

Conclusion on alleged Defect 1

1. [197]

   For the above reasons, I find that the failure to install a waterproof membrane to RW1 and RW2 and defective brickwork in the garage area were a breach of the Contract and was a cause of the water ingress, and consequential damage, to the Property.

2. [198]

   MBG was contracted to build planter boxes on the terrace above the garage, located on what is referred to as the ‘basement level’ in the Amores drawings annexed to the Contract. MBG did construct those planter boxes and they were not waterproofed. What is in dispute is whether MBG was required to waterproof the planter boxes. The plaintiff engaged a third party waterproofing contractor to rectify the lack of waterproofing at a cost of $8,173, and claims damages in that amount.

3. [199]

   The ‘cost sheet’ annexed to the Contract stated that the tasks for the ‘basement level’ included ‘waterproofing’ and construction of the planter boxes (as noted earlier).

4. [200]

   While Xypex was used for the concrete mix for the planter boxes, the building experts (Mr Hall and Mr Bulmer) were in agreement that Xypex alone is not sufficient for waterproofing planter boxes. MBG undertook only temporary waterproofing of the planter boxes during the construction of the terrace area (which Mr Brujic described as a ‘light coat of waterproofing’). He said in his affidavit dated 1 July 2022 that he did not conduct any further waterproofing of the planter boxes:

5. [201]

   The defendants submitted in their closing submissions that the landscaping and waterproofing of the planter boxes was deleted from the scope of works under the Contract and was completed by a separate landscaping contractor working for the plaintiff. It was also submitted that there was no detail in the Amores drawings or the RE drawings for waterproofing the planter boxes.

6. [202]

   While it is not in dispute that the landscaping work was undertaken by a landscaper engaged directly by the plaintiff, the evidence does not establish that the waterproofing of the planter boxes was ‘deleted’ from the scope of works under the Contract. Nor in my view was it necessary for the Amores drawings to specify the waterproofing required.

7. [203]

   Mr Hall and Mr Bulmer were in agreement that the ‘temporary waterproofing’ conducted by Mr Brujic was insufficient (T237.49). The essential difference of opinion between them, as stated in the Joint Report, was that Mr Hall’s view was that waterproofing was included in the builder’s quotation and by applying only a ‘temporary waterproofing’ he had failed to comply with Australian Standard AS4654.2-2012, whereas Mr Bulmer proceeded on the assumption that permanent waterproofing of the planter boxes had been removed from MBG’s scope of works under the Contract so that there was no defective work. As stated earlier, the assumption on which Mr Bulmer proceeded is not correct.

8. [204]

   Clause 3.8.1.3 of Volume Two of the BCA requires waterproofing membranes for external above ground use to comply with the Australian Standard AS 4654-2012 entitled ‘Waterproofing membranes for external above-ground use’. Clause 2.13 of that Standard addresses planter boxes, providing specific guidelines for their waterproofing, including the requirement for proper drainage considerations and the use of an internal waterproofing membrane. Mr Hall’s evidence, which I accept, is that Xypex is not recognized or accepted under AS 4654-2012 as a waterproofing membrane or system (T234.20).

9. [205]

   I accept Mr Hall’s evidence that the planter boxes do not comply with AS 4654.2-2012 and that this non-compliance led to water ingress and constitutes a non-compliance with the BCA.

10. [206]

    I find in failing to waterproof the planter boxes MBG failed to do the work of installing the planter boxes with due care and skill, and breached of cl 2(1)(a), cl 3(a), cl 9(a) and cl 9(c) of the Contract. The plaintiff is entitled to damages in the amount claimed for this item.

11. [207]

    MBG was contracted to install a new roof above the kitchen and living area on the basement level, a small portion of roof above the main bedroom and a skylight above the internal staircase by cutting into the existing roof. The plaintiff’s evidence was that water leaked from each of these areas until a third party contractor hired by her, Big Blue Roofing, undertook repairs. The plaintiff engaged a third party roofing contractor to rectify the roof and skylights at a cost of $5,957. She claims damages for that amount.

12. [208]

    In his first report, Mr Hall identified three defects in the installation of these works: first, the failure to satisfy the requirement of Australian Standard 3500.3 that sealant joints be used in conjunction with mechanical connections spaced at not more than 40mm centres; second, the use of lead flashings in contact with zincalume material; third, defective back flashing to the skylights above the kitchen/living area.

13. [209]

    Mr Bulmer’s view was that the existing (and original) high-level roof was past its serviceable life and the existing roof flashings were defective and were a likely cause of the water entry. Mr Hall agreed with Mr Bulmer that the top original roof was not in great condition but considered that this was not the explanation for the water leaks which had occurred, and now been remedied, and that the defective work was the cause of the water ingress. I accept Mr Hall’s view on this issue in light of the plaintiff’s evidence regarding the leaks she observed before the rectification work was done.

14. [210]

    I find that MBG failed to do the work with due care and skill and in accordance with the Amores drawings and the BCA. Hence, MBG breached cl 2(1)(a), 3(a), 9(a) and 9(c) of the Contract, and the plaintiff is entitled to damages in the amount claimed for this item.

15. [211]

    Under the Amores drawings, MBG was required to install a box gutter on the western side of the Property. It was in fact constructed on the eastern side of the Property. The plaintiff contends that it was not constructed to the standard required by BCA P2.2.1 set out earlier and Australian Standard AS 3500.3. The plaintiff claims damages for the cost of the rectification work estimated by Mr Whyte at $11,412 (ex GST).

16. [212]

    The defendants contend that the location of the box gutter was changed following a request by the plaintiff to Mr Brujic in a conversation on around 7 February 2016 that it be moved to its present location to accommodate a change to a 5 panel bifold door at the request of the plaintiff. The plaintiff denies that the conversation occurred and says that she first became aware of the change to the location of the box gutter and the associated downpipe in mid 2020 when water leaks occurred. I note there is no contemporaneous documentation to support Mr Brujic’s evidence, and I do not accept it.

17. [213]

    I accept Mr Hall’s evidence that the installation of the box gutter does not meet the standards in the BCA and its referenced standard AS 3500.3 in at least the following respects:

    1. (1)

       There is no sump at the bottom end of the box gutter, which is required by AS 3500.3 Figure 3.7 (CB 325 [6.5.4]). The BCA mandates this feature to ensure proper water flow and prevent blockages.

    2. (2)

       There is no surcharge pit at the base of the downpipe on the terrace (CB 325 [6.5.6]), which is another violation of the BCA’s requirement for proper overflow provisions.

    3. (3)

       The stormwater pipes lack the required minimum fall of 1:100, with some areas having negative fall (CB 325 [6.5.10]), proper fall being necessary for effective water drainage.

18. [214]

    These deficiencies collectively establish that the installation of the box gutter fails to provide adequate overflow protection and proper water flow and increase the risk of water entry into the building and structural damage due to inadequate drainage.

19. [215]

    I find that MBG failed to do the work with due care and skill and in accordance with the Amores drawings and the BCA, and hence breached cl 2(1)(a), 3(a), cl 9(a) and 9(c) of the Contract. The plaintiff is entitled to damages in the amount claimed for this defect.

20. [216]

    MBG was required to construct new boundary brick walls for the kitchen/living area on the basement level shown on the Amores drawings. It was not in dispute that it constructed those walls in accordance with the Amores drawings. Mr Hall and Mr Bulmer both gave evidence on whether the construction of these walls complied with the requirements of the BCA Performance Requirement 2.1 and Australian Standard AS 4773. AS 4773.2 sets out the requirements for damp-proof courses, flashings and weep holes in masonry walls. Mr Hall considered that they did not, whereas Mr Bulmer considered that they did.

21. [217]

    The plaintiff sought a finding that MBG failed to construct the walls to the kitchen/living area with due care and skill based on the opinion of Mr Hall, and damages based on the rectification method identified by Mr Hall which was demolition of the walls and the construction of new walls. The amount ascribed by Mr Whyte for the cost of this rectification work is $133,834 (ex GST).

22. [218]

    Mr Hall stated in his first report that he had observed elevated moisture readings in the walls, which in his oral evidence he clarified as being in the eastern wall immediately above RW1 East (T354.15). This is an external wall which adjoins the rear of 50 King Street, and the presence of dampness in the wall is confirmed by photographs in evidence taken from the 50 King Street side which show deterioration of the paint on the wall on that side. He also stated that he thought that the explanation was that ‘the builder has not installed the required cavity wall flashings and weep holes to the brick walls for water egress [from] the building’. He expressed the same conclusion in his second report.

23. [219]

    In the Joint Report Mr Hall stated that he maintained his position that the dampness in the walls was ‘due to lack of flashings and weepholes for water egress’. However, in his oral evidence he accepted that it was not possible for there to be weep holes or cavity flashing as the walls are not cavity walls (T355.44). That was also Mr Bulmer’s view.

24. [220]

    Mr Hall also said in his oral evidence that he still considered that the construction of the walls to be defective because a damp course was required in the kitchen/living area as well as ‘weather proofing and coatings to be applied externally so … that wall is a dry wall and doesn’t allow moisture in’ (T352.12). He then said (T352.22):

25. [221]

    Mr Bulmer’s view was that if the roof to the kitchen/living area was watertight then it would be sufficient for a waterproofing product such as ‘Drizoro’ to be applied to the exterior of the wall (T359.35). He was also of the view that a damp course would be restrictive in terms of structural stability given the height of the walls (T362.4), and Mr Hall accepted that there would potentially be safety issues if a damp course was installed (T362.29).

26. [222]

    The new issues raised by Mr Hall in his oral evidence were not the reasons he gave in his two reports in support of his opinion on this issue. Perhaps for this reason, Mr Brujic was not cross examined on the evidence he gave in his affidavit dated 1 July 2022 that he did arrange for the laying of a ‘damp course’ in early February 2016 (at paragraph [157]) and that he did attempt to apply the Drizoro product on the 50 King Street side of the Eastern wall in early November 2016, but was denied access by the owner of that property (at paragraphs [249]- [250]). Mr Brujic’s evidence that he asked the plaintiff to get the neighbour’s permission for him to access that property to undertake this work was not challenged. Also, the PCA provided an interim occupation certificate on 15 June 2017 and he was not called to give evidence.

27. [223]

    In my view, given the rather unsatisfactory state of the evidence, the plaintiff has failed to discharge her onus of establishing that MBG failed to construct the walls in accordance with BCA Performance Requirement 2.1 and Australian Standard AS 4773.2, or that it failed to exercise due care and skill in the construction of the walls. Accordingly, the plaintiff is not entitled to the damages claimed for this alleged defect.

Conclusion on Issue 1

1. [224]

   For the above reasons, the plaintiff has succeeded in relation to Defects 1 to 4, (representing items SS#6.1, 6.2, 6.3, 6.5 and 6.7 in the Scott Schedule).

Issue 2: Whether Mr Brujic is liable under s 37(1) of the DBPA

1. [225]

   Part 4 of the DBPA headed ‘Duty of care’ includes s 37 which imposes a duty of care on persons who carry out ‘construction work’. Section 37 provides:

2. [226]

   The expression ‘construction work’ is defined in s 36(1) to mean any of:

3. [227]

   The expression ‘building work’ is defined broadly in s 4(1), and s 36(1) provides that it includes residential building work within the meaning of the HBA. It is not in dispute the work to be performed under the Contract is ‘residential building work’ as defined in cl 2 the Dictionary to the HBA.

4. [228]

   The expression ‘owner’ of land is defined in s 36(1) to include every person who jointly or severally or at law or in equity is entitled to the land for an estate of freehold. It is not in dispute that the plaintiff is the owner of the relevant land in the present case.

5. [229]

   Other relevant provisions of Part 4 are:

   1. (1)

      s 39 which provides that ‘a person who owes a duty of care under this Part is not entitled to delegate that duty’;

   2. (2)

      s 40 which precludes the contracting out of Part 4;

   3. (3)

      s 41(1) which provides that Part 4 is in addition to duties, statutory warranties or other obligations imposed under the HBA , other acts or the common law, and does not limit those duties, warranties or other obligations;

   4. (4)

      s 41(3) which provides that Part 4 is subject to the CLA.

6. [230]

   The DBPA commenced on 10 June 2020 and operates retrospectively: Roberts v Goodwin Street Developments Pty Ltd [2023] NSWCA 5; (2023) 110 NSWLR 557 at [185].

7. [231]

   In summary:

   1. (1)

      the duty under s 37(1) will be imposed on Mr Brujic if he carried out ‘construction work’, relevantly here the work described in paragraph (d) of the definition of that term in s 36(1);

   2. (2)

      the duty is owed to each owner of the land in relation to which the construction work is carried out;

   3. (3)

      the content of the duty is to exercise reasonable care to avoid economic loss caused by defects in or related to a building for which the work is done, and arising from the construction work.

8. [232]

   In relation to the first element, Mr Brujic was the nominated supervisor under under MBG’s contractor licence, and in that role he supervised and made decisions as to the manner of carrying out of, and was able to control, the building work by MBG under the Contract which resulted in the ‘water issues’ and ‘install issues’ pleaded in the ASOC. Hence he carried out ‘construction work’ in relation to that building work (Kazzi v KR Properties Global Pty Ltd t/as AK Properties Group [2024] NSWCA 143 at [78] and [126]).

9. [233]

   Consequently, Mr Brujic owed a duty to the plaintiff, as the owner of the Property, under s 37(1) to exercise reasonable care to avoid economic loss caused by defects in or related to a building for which the work was done, and arising from the construction work.

10. [234]

    The ‘water issues’ are said to be the failure of the defendants to waterproof (a) the planter boxes on the balcony; (b) the garage level new concrete walls (gym/cellar-eastern, southern and western walls); (c) the internal staircase from the garage-western side of the property; (d) the garage level brick walls-garage; and (e) build the kitchen level-western and eastern side walls to prevent water entering into the property and into the walls (ASOC, [45F]).

11. [235]

    In relation to items (a), (b) and (d), Mr Brujic supervised the building of the planter boxes on the balcony/terrace, the new concrete walls in the area marked ‘cellar’ and ‘gym/storage’ on the garage level and the new brick walls in the garage on that level. He was the person responsible for allowing MBG to deviate from the plans and specifications in the Contract (including the RE Drawings) requiring waterproofing, and to adequately waterproof those items. I have found that MBG failed to do that work with due care and skill. I find that there was a breach by him of the duty in s 37 to take reasonable care to avoid economic loss caused by the lack of waterproofing. I did not understand item (c) to be pressed, and I have rejected the contention in relation to item (e) in the consideration of the breach of contract claim (Defect 5).

12. [236]

    The ‘install issues’ are said to be the failure to properly install (a) the roof and skylights; (b) electrical work; and (c) the box gutter is in the master bedroom on the western side (ASOC, [45G]).

13. [237]

    In relation to items (a) and (c) I have already found that there was a failure by MBG to do the work with due care and skill (Defects 4 and 5). Mr Brujic supervised that work and was responsible for the manner in which the roof and skylights and the box gutter were installed. I find that the manner in which that work was done was a breach by him of the duty in s 37 to take reasonable care to avoid economic loss caused by the defective installation.

14. [238]

    Accordingly, the claim against Mr Brujic under s 37 is made out in part.

Background

1. [239]

   Part 4 of the CLA contains the proportionate liability provisions. In summary:

   1. (1)

      Part 4 applies to ‘apportionable claims’ which include, relevantly, ‘a claim for economic loss or damage to property in an action for damages (whether in contract, tort or otherwise) arising from a failure to take reasonable care, but not including any claim arising out of personal injury’: s 34(1).

   2. (2)

      Excluded from Part 4 are claims in an action for damages arising from a breach of statutory warranty under Part 2C of the HBA and brought by a person having the benefit of the statutory warranty: s 34(3A).

   3. (3)

      The key provision by a person’s liability for loss arising from an apportionable claim may be reduced is s 35(1) which provides:

   4. (4)

      The expression ‘concurrent wrongdoer’ is defined to mean ‘a person who is one of two or more persons whose acts or omissions (or act or omission) caused, independently of each other or jointly, the damage or loss that is the subject of the claim’: s 34(2).

   5. (5)

      Part 4 applies irrespective of whether or not all concurrent wrongdoers are parties to the proceedings: s 35(4).

   6. (6)

      Part 4 does not prevent a person from being held vicariously liable for a proportion of any apportionable claim for which another person is liable: s 39(a).

2. [240]

   As set out earlier, s 39 of the DBPA provides that the statutory duty under s 37 is non-delegable. This makes s 5Q of the CLA also relevant. This provides:

3. [241]

   The defendants submitted that they are entitled to raise a ‘defence’ based on s 35 CLA to limit their liability on the basis that (a) the PCA, Ross Engineering, Amores Design and Shreeji Consultants are ‘concurrent wrongdoers’ within the meaning of s 34 of the CLA and (b) the High Court’s decision in Pafburn Pty Limited v The Owners – Strata Plan No 84674 (2024) 99 ALJR 148; [2024] HCA 49 (Pafburn HCA) is distinguishable because the contract in that case is one against a head contractor for liability arising from the actions of sub-contractors, whereas each of the persons mentioned in (a) are not sub-contractors of the defendants.

4. [242]

   The plaintiff submitted that it followed from the decision of the Court of Appeal in The Owners – Strata Plan No 84674 v Pafburn Pty Limited (2023) 113 NSWLR 105; [2023] NSWCA 301 (Pafburn CA), affirmed in Pafburn HCA, that the PCA, Ross Engineering, Amores Design and Shreeji Consultants are not ‘concurrent wrongdoers’ for the purposes of s 34 of the CLA and accordingly Part 4 of the CLA did not apply.

Consideration

1. [243]

   The Pafburn proceedings concerned a building defects claim for damages for breach of s 37 of the DBPA brought by the Owners Corporation against the builder (Pafburn Pty Ltd) and developer (Madarina Pty Ltd), each of whom sought to rely on proportionate liability defences under Part 4 of the CLA. They named nine concurrent wrongdoers: (a) the defendants architect; (b) the company which recommended and installed various panels used by the builder in the construction of the building; (c) the manufacturer of the panels; (d) the developer’s certifier; (e) the builder’s tiling subcontractor; (f) the builder’s waterproofing subcontractor; (g) the waterproofing subcontractor’s tradesperson; (h) the Council which approved the plans which were now said to be non-compliant with the BCA and fire safety laws; (i) the builder’s formwork subcontractor.

2. [244]

   The matter came before the primary judge as an application by the Owners Corporation to strike out the proportionate liability defence: Owners – Strata Plan No 84674 v Pafburn Pty Ltd [2023] NSWSC 116. Her Honour declined to do so, concluding that while s 39 of the DBPA provides that the statutory duty created by s 37 is non-delegable, s 5Q of the CLA was not engaged because s 37 creates a statutory duty and not a liability in tort (see [2023] NSWSC 116 at [52]). One of the submissions of the defendants in support of that conclusion was that the question of whether any of the putative ‘concurrent wrongdoers’ was indeed a ‘delegate’ was a factual matter to be determined at trial, and as such an application to strike out at that stage would have been premature (see [2023] NSWSC 116 at [46]).

3. [245]

   The Court of Appeal upheld the appeal by the plaintiff on the basis that the duty of care in s 37 of the DBPA is, by virtue of s 39 of the DPBA, taken outside of the reach of the provisions of Part 4 of the CLA without any qualification as to whether the putative ‘concurrent wrongdoers’ were a ‘delegate’ of the defendant having a liability under s 37 of the DBPA: Pafburn CA per Ward P at [1], Adamson JA at [11] and Basten AJA at [56].

4. [246]

   The appeal to the High Court was dismissed by a 4:3 majority. The crux of the reasoning of the majority (Gageler CJ, Gleeson, Jagot and Beech-Jones JJ) as to why the claim for breach of the duty of care in s 37 as it applied on the facts of that case was not apportionable is set out in Pafburn HCA at [56]-[57] (emphasis added):

5. [247]

   The focus of this reasoning is not that any claim for breach of s 37(1) of the DPBA is not amenable to apportionment under Part 4 of the CLA, but rather that, by virtue of s 39 of the DPBA, any delegation of works subject to a duty under s 37(1) would trigger the operation of s 5Q of the CLA, which in turn has the effect that any and all liability incurred by the delegatee will be treated as being the liability of the delegator on a vicarious basis. Hence, it is arguable, based on the reasoning of the majority in Pafburn HCA, that only claims which involves some kind of delegation of works in relation of which the defendant owes a duty under s 37 DBPA would fall outside of the scope Part 4 of the CLA, on the basis that a defendant in such a case would always be liable for 100% of the loss or damage suffered, either on a direct basis or vicarious basis (because of s 5Q), rather than because Part 4 of the CLA would automatically apply to any claim pursuant to s 36 of the DBPA.

6. [248]

   Such a conclusion is supported by the majority’s treatment of the ‘seemingly anomalous’ position of the local council and the principal certifying authority in Pafburn HCA. One of the appellant’s chief arguments in that matter was that they could not be considered to have ‘delegated’ any part of the works to these entities, such that s 5Q could not apply. Nevertheless, the majority held that because the appellants agreed that the local council and the principal certifying authority carried out ‘construction work’ within the meaning of s 36(1) DBPA ‘necessarily’ meant that they have ‘entrusted’ to those entities functions ‘within the meaning of “construction work”’ (at [61]). In my view, the majority’s explicit confinement of its reasoning in this regard, and in a manner which necessitated the involvement of s 5Q, means that there is force in the contention that (at least on the majority’s reasoning) Part 4 CLA will only be excluded in a claim which involves the ‘delegat[ion] or otherwise entrust[ment]’ of works. It is also arguable that such a construction would give s 41(3) of the DPBA (which provides that s 37(1) of the DPBA is subject to Part 4 of the CLA) work to do, whereas the opposite construction (that claims under s 37(1) are inherently unamenable to apportionment) renders s 41(3) of the DPBA otiose.

7. [249]

   However, while that argument is open on the majority’s reasoning in Pafburn HCA, it is inconsistent with the reasoning in Pafburn CA which was not disapproved by the majority in Pafburn HCA.

8. [250]

   It is apparent from the reasoning of Basten JA (with whom Ward P agreed) that a necessary step in his Honour’s reasons for upholding the appeal was that it does not matter whether the putative concurrent wrongdoer can be characterised as a ‘delegate’. Basten JA said at [20]:

9. [251]

   From this passage, it is clear that the Court of Appeal was very much aware of the fact that the only way in which it would not matter whether the other independent contractors was if Part 4 of the CLA was if the statutory scheme under Part 4 was to be construed in a way that it is not available at all as a defence to a claim in respect of s 37 of the DBPA at all. That conclusion was confirmed at paragraph [56] of the decision when Basten JA, after considering the proper construction of Part 4 (at [51]-[55]), held that (emphasis added):

10. [252]

    The reference to this path of reasoning, which did not involve any consideration of s 5Q, as a ‘sufficient basis’ to resolve the appeal, suggests that it was a distinct basis on which the Court of Appeal decided the matter which was separate from the remaining basis on which the appeal was decided (namely that which involved a consideration of s 5Q). This also explains the breadth of the remaining observations by the other members of the Court (especially that of Adamson JA at [11]-[12] and Ward P at [1]), to the effect that s 39 by “necessary implication” excludes the operation of Part 4 CLA to a duty under s 37. Such a conclusion also did not involve any consideration of the impact of s 5Q of the CLA.

11. [253]

    In my view, the reasoning in Pafburn CA in support of the conclusion that Part 4 does not apply to a claim under s 37 of the DBPA is part of the ratio of that decision and is binding on me: see Jacob v Utah Construction & Engineering Pty Ltd (1966) 116 CLR 200 at 217; Ratcliffe v Watters (1969) 89 WN (NSW) (Pt 1) 497 at 505; McBride v Monzie [2007] FCA 1947 at [6].

12. [254]

    As Adamson JA noted in Pafburn CA at [14], this does not leave a person subject to a claim under s 37 of the DBPA without a remedy as that person can bring a cross-claim against concurrent wrongdoers. Pafburn CA was handed down on 13 December 2023, which was some 11 months before the hearing in this matter. No cross claim was brought in this case against the putative concurrent wrongdoers despite her Honour’s observation.

13. [255]

    It follows that Mr Brujic does not have an apportionable claim under Part 4 of the CLA.

14. [256]

    In relation to MBG, the defence based on there being an ‘apportionable claim’ under Part 4 is not precluded by Pafburn CA. What is pleaded in the AD is that the claim against MBG in respect of any loss or damage due to ingress of water to the garage level of the Property is an ‘apportionable claim’ under Part 4. This relates to Defect 1 only. The only claim against MBG in relation to that matter is for breach of clauses 2, 3 and 9 of the Contract. I have concluded above that MBG is liable for damages for breach of contract in respect of the ingress of water to the garage level of the Property, but on the basis that MBG breached cl 2(1)(a), cl 3(a), cl 9(c) and cl 9(f) of the Contract.

15. [257]

    The only extent to which these pleaded claims relating to those clauses of the Contract arise from a failure to take reasonable care is the claim for breach of cl 9(a) which requires that the work under the Contract be done ‘with due care and skill and in accordance with the plans and specifications set out in the Contract’. However, given that cl 9(a) merely replicates the statutory warranty in s 18B(1)(a) of the HBA, the claim for breach of cl 9(a) is properly regarded as a claim in an action for damages arising from a breach of statutory warranty under Part 2C of the HBA and brought by a person having the benefit of the statutory warranty; hence it is not an ‘apportionable claim’ under Part 4 of the CLA due to s 34(3A) of the CLA: Onslow v Cullen [2022] NSWSC 1257 at [55]-[58]; see also Gerrard Toltz Pty Ltd v City Garden Australia Pty Ltd (in liq) (No 2) [2024] NSWCA 232 at [171]-[183] per Stern JA and [191]-[244] per Basten JA. It follows that MBG does not have an apportionable claim under Part 4 against the putative concurrent wrongdoers.

Issue 4: Whether Mr Brujic’s defence of contributory negligence is made out

1. [258]

   As noted earlier, the AD pleads a defence of contributory negligence in relation to the plaintiff’s conduct regarding the waterproofing and drainage of the garage level works (in particular with regard to RW1) and the removal of the deep soil planter box. In closing submissions, it was submitted by the defendants that ‘but for [the plaintiff’s] decision not to allow the boundary walls of the garage to be set back from the boundary the waterproofing membrane stipulated on the retaining walls might have been applied’.

2. [259]

   Although it was not clear which claim these submissions were made in respect of, UCPR r 14.16 requires a defendant who wishes to rely on the defence of contributory negligence must specifically plead the contributory negligence. On these pleadings, the defence is pleaded only in respect of the claim in relation to breach of s 37 of the DBPA against Mr Brujic.

Principles

1. [260]

   It was not in dispute that a defence of contributory negligence is capable of being advanced in respect of a breach of s 37 of the DBPA. In my view this is correct, either on the basis s 37(3) of the DBPA assimilates the duty arising under s 37 to the duty of care established by the common law, or as a result of s 9(1) of the Law Reform (Miscellaneous Provisions) Act 1965 (NSW) which provides:

2. [261]

   The expression ‘wrong’ is defined in s 8 of that Act to include an act or omission that ‘gives rise to a liability in tort in respect of which a defence of contributory negligence is available at common law’.

3. [262]

   I note that in Southern Region SLSA Helicopter Rescue Service Pty Ltd v NSW Golf Club Co Ltd [2021] NSWSC 1493, which was an application to amend a List Response where breaches of s 37 of the DBPA were alleged in the original List Statement, there was an issue as to whether potential amendments to that List Response in respect of a defence in contributory negligence ought be allowed (at [25]-[30]). Although rejecting the proposed amendments on other grounds, Stevenson J was evidently prepared to proceed on the basis that the defence was capable of being advanced against a claim in respect of s 37 of the DBPA as a matter of law (see also Owners - Strata Plan 80867 v Da Silva [2024] NSWDC 263 at [259]-[263] per Waugh SC DCJ).

4. [263]

   The conclusion that the defence in contributory negligence does apply to a claim under s 37 of the DBPA is consistent with the principles governing the character of the duty under s 37 as a non-delegable duty, which is also sometimes referred to as a duty to ensure that ‘reasonable care is taken’ (see eg. Kondis v State Transport Authority (1984) 154 CLR 672 at 687 per Mason J). More precisely, the nature of the duty under s 37 DBPA of the Act on these facts is that of the second kind of non-delegable duty identified by Gleeson CJ in Leichhardt Municipal Council v Montgomery (2007) 230 CLR 22; [2007] HCA 6 at [9]-[10], where ‘the engagement of a third party to perform a certain function is consistent with the exercise of reasonable care by a defendant, but the defendant’s legal duty is not merely to exercise reasonable care but also (if a third party is engaged) to ensure that reasonable care is taken’. To this end, the obligation on the defendant to ‘ensure that reasonable care is taken’ would operate to render that party liable for ‘the act or omission of some third party, for whose fault the defendant would not ordinarily be vicariously responsible’ (emphasis added). In my view, such a definition expressly limits the liability of the defendant upon whom the non-delegable duty is imposed to acts or omissions by third parties to whom there has been a delegation of some part of the work by the defendant, and not those acts or omissions by the plaintiff.

5. [264]

   This conclusion is consistent with the fact that appellate courts have regarded a defence on the basis of contributory negligence in respect of breach of non-delegable duty claims as legally open: see eg. Pacific Steel Constructions Pty Ltd v Barahona [2009] NSWCA 406 at [128]-[129], [141]-[143]; Rail Corporation New South Wales v Donald [2018] NSWCA 82 at [201]-[205]. There appears to be no reason in principle why the same cannot be true as regards a claim under s 37 of the DBPA, especially in the light of the statutory prescription found in s 41(1) and (3) of the DBPA which expressly provide that Part 4 of that Act (to which s 37 belongs) ‘do not limit the duties, warranties or other obligations imposed under that Act, other Acts or the common law’ and is ‘subject to the Civil Liability Act 2002’.

6. [265]

   This conclusion is also not inconsistent with Pafburn CA, given that the definition of ‘concurrent wrongdoer’ in s 34(2) of the CLA has been held not to include a plaintiff who is guilty of contributory negligence: Rennie Golledge Pty Ltd v Ballard (2012) 82 NSWLR 231; [2012] NSWCA 376 at [15] per Basten JA, [128]-[132] per Campbell JA. As such, the inability of a defendant to reduce their liability by reference to ‘concurrent wrongdoers’ does not prevent them from doing so by reference to a party who is not a concurrent wrongdoer, which is governed by the combined effects of s 5R of the CLA and s 9 of the LRMPA rather than Part 4 of the CLA.

7. [266]

   Turning now to the requirements for the defence, as indicated in Rail Corporation (at [201]), the starting point for determining whether the plaintiff was contributorily negligent is s 5R of the CLA, which provides:

8. [267]

   It has been established that the ‘principles’ referred to in s 5R(1) above are those prescribed by s 5B: Verryt v Schoupp [2015] NSWCA 128; (2015) 70 MVR 484 at [27]. That is so even in claims involving pure economic loss or property damage: About Life v Maddocks Lawyers [2021] NSWSC 1370 at [657]-[660], cited in Ling v Beyond Development Group Pty Ltd [2022] NSWSC 685 at [359], [397]. Sections 5B provide as follows:

9. [268]

   In addition, s 5C also provides as follows:

10. [269]

    In relation to the application of s 5R and the interactions between it and sections 5B and 5C, the following observations were made by the Court of Appeal in Grills v Leighton Contractors Pty Ltd [2015] NSWCA 72 (quoted with approval in Boateng v Dharamdas [2016] NSWCA 183 at [129] and applied in Rail Corp at [201]):

11. [270]

    In addition, the following guidelines are relevant to the process by which a court approaches the task of determining whether contributory negligence has been established on the facts, as stated by a majority of the High Court in Astley v Austrust (1999) 197 CLR 1 at [30]:

Consideration

1. [271]

   I will now address the seven matters said to involve contributory negligence by the plaintiff.

2. [272]

   The first is that the plaintiff contracted with MBG to use Xypex as the waterproofing solution in the construction of the garage level boundary walls. I reject this contention because the Contract did not provide that MBG could use Xypex for the waterproofing of the garage level boundary walls. There is in fact no mention of Xypex in the Contract. Insofar as this is a contention that the Contract was varied in the meeting on 11 October 2015 to permit the use of Xypex as a substitute for a waterproof membrane for RW1 and RW2, I have rejected that submission the reasons given earlier.

3. [273]

   The second is that the plaintiff failed to inform the defendants that the proposed construction of the garage level was other than construction of a class 10.a structure under the National Construction Code. I reject this contention because the plaintiff did not have any responsibility to the defendants to inform them of the building classification under the BCC. It was apparent, for the reasons given earlier, from the construction certificate that it was only the area of the existing garage which was a Class 10 building.

4. [274]

   The third is that the plaintiff failed to provide the defendants with a copy of the development consent conditions imposed by either the Council or the Land and Environment Court for the development of the Property, in particular that it was a condition that the garage level the ‘tanked’. For the reasons given earlier, I am satisfied that the plaintiff did provide a copy of the Consent Conditions to the Defendants on around 15 September 2015. In any event, this contention goes nowhere because Consent Condition 3.8(d) which required the ‘tanking’ of RW1 and RW2 was satisfied by the preparation of the RE drawings with the inclusion of the ‘approved waterproof membrane’ and the water stop for those walls. The defendants were certainly aware of the requirement for tanking in those drawings.

5. [275]

   The fourth is that the plaintiff refused and failed to instruct her architect or structural engineer to amend the design of the development at RW 1 to allow an alternative method waterproofing to Xypex to be installed. This contention is not made out because there was no requirement for the plaintiff to instruct her architect or Ross Engineers to amend the design to allow Xypex to be used for RW1, because Xypex was not an appropriate method for ‘tanking’ that wall.

6. [276]

   The fifth is that the plaintiff failed to take account of advice provided to her by Martens, consulting engineers, in their report of September 2013 to the effect that retaining walls be constructed to allow backfill to the boundary for adequate drainage. It is not clear why it is said that the plaintiff should have taken into account a report prepared by Martens in September 2013 which was prior to the Development Consent. Relevantly, the Development Consent included a requirement for ‘tanking’ in Condition C.8(d) and the RW drawings met that requirement. The defendants have not established that the construction of the walls to allow backfill was necessary to meet the tanking requirement. I am satisfied on the evidence that a waterproof membrane was capable of being applied to RW1 and RW2 to achieve the required tanking.

7. [277]

   The sixth is that the plaintiff failed to take the advice provided by her nominated building consultant, Mr Paul Cavallo, in his email of 24 February 2016, the relevant part of which is set out above. As set out there, Mr Cavallo suggested that the plaintiff should ensure that the engineer visited the site regularly and had designed all structural components so far, and he added (emphasis added): ‘…so cover yourself and him by ensuring the Engineer visits regularly’. The ‘him’ is a reference to Mr Brujic, to whom the plaintiff forwarded a copy of the email shortly afterwards. Hence any caution provided to the plaintiff in the email was equally provided to Mr Brujic. The defendants failed to show how, given the time at which this email was sent, it could reasonably be said that it could have had any impact on the construction work to which the claim against Mr Brujic relates, in particular the structural work to construct RW1 and RW2 which by this time had already been done.

8. [278]

   The seventh is that the plaintiff instructed Shreeji Consultants to remove the deep soil planter box shown in the original architectural drawings, and directed the defendants to construct the development accordingly, which adversely affected the drainage of water from the property. It is not in dispute that the plaintiff changed the design of the deep soil planter box to replace it with the shallow ‘tub’ structure which was constructed in the area on the terrace where the deep soil planter box was designed to be placed. The defendants have not established that this had any impact on the drainage to the garage level or the terrace.

9. [279]

   For these reasons, Mr Brujic has not discharged his onus of demonstrating any contributory negligence by the plaintiff.

Issue 5: What damages, if any, are payable

1. [280]

   The measure of damages for breach of a building contract is the reasonable costs of rectification of the defects complained of so as to give the plaintiff ‘the equivalent of a building on her land which is substantially in accordance with the contract’ subject to the qualification that the rectification work must be necessary to produce conformity and must be ‘a reasonable course to adopt’: Bellgrove v Eldridge (1954) 90 CLR 613 at 617-618.

2. [281]

   In Tabcorp Holdings Ltd v Bowen Investments Pty Ltd (2009) 236 CLR 272; [2009] HCA 8 at [17], the High Court said that such work will only be considered unreasonable in ‘fairly exceptional circumstances’. For example, the cost of rectification will be unreasonable if it is wholly disproportionate to achievement of the contractual objective: Bannister & Hunter Pty Ltd v Transition Resort Holdings Pty Ltd (No 2) [2013] NSWSC 1943 at [330].

3. [282]

   The Damages claimed by the Plaintiff (supported by the unchallenged evidence of Mr Whyte) is as follows (MFI-5):

4. [283]

   The plaintiff also claims pre-judgment interest on these amounts.

5. [284]

   I have found that the plaintiff has succeeded in relation to items SS#6.1, 6.2, 6.3, 6.5 and 6.7, but not in relation to item SS#6.8. Items SS#6.4 and 6.6 were not pressed.

6. [285]

   The defendants did not dispute the damages claimed for those items with one exception. In closing submissions, Mr Robinson submitted that the damages for item SS#6.2 should not be the cost of demolition and reinstallation of RW1 and RW2 (which is how the damages in the above schedule was calculated). He submitted that rectification work of this nature was unreasonable, because there was an alternative and significantly more cost-effective rectification measure available. He relied on an email sent by Mr Kantouros to the plaintiff on 9 September 2020 following a site visit on 25 August 2020 in which he inspected RW1 and RW2 and observed concrete shrinking cracks in those walls and said ‘cracks that are of concern for water [ingress] should be filled with a suitable proprietary filler’ and forwarded a link to such a filler being a product manufactured by Ardex (Ex 4, p130).

7. [286]

   Mr Kantouros accepted in cross examination that he had visited the site and made a recommendation as to how the cracks in the concrete he had observed could be repaired (T87.38) but the matter was not taken any further with him. The experts provided no evidence on whether injecting the concrete walls RW1 and RW2 with a suitable proprietary filler would be an adequate method of rectifying the failure to install a waterproof membrane behind those walls. In view of this I accept the plaintiff’s submission that the defendants have failed to establish that the proposed rectification work for which damages are being calculated by Mr Whyte is unreasonable.

8. [287]

   The defendants did not challenge any of the other items in the schedule set out above. There is no dispute that the plaintiff is entitled to pre-judgment interest on those amounts.

Conclusion

1. [288]

   For the above reasons, I have concluded that (a) the plaintiff has succeeded in her claim for breach of contract against MBG relation to items SS#6.1, 6.2, 6.3, 6.5 and 6.7 of the Scott Schedule and is entitled to damages in the amount claimed; (b) the plaintiff has succeeded in her claim against Mr Brujic for breach of the duty of care in s 37 of the DBPA in respect of those items and is entitled to damages in the amount claimed for those items; (c) Mr Brujic and MBG do not have an apportionable claim under Part 4 of the CLA and (d) Mr Brujic has not discharged his onus of demonstrating any contributory negligence by the plaintiff.

2. [289]

   I will hear the parties on costs.

3. [290]

   I will direct the parties to bring in short minutes of order to give effect to these reasons. I will also grant liberty to apply in the event that there is a disagreement as to the form of the orders.