The Owners – Strata Plan No 74602 v Brookfield Australia Investments Ltd

These proceedings concern a residential development known as “Beau Monde” in North Sydney. In that building, the 9th to 36th levels comprise 241 strata apartments.

The plaintiff is the relevant owners corporation and the registered proprietor of the common property. I shall refer to it as “the Owners Corporation”.

The Owners Corporation came into existence on 6 April 2005 upon registration of the relevant strata plan.

There are two active defendants to the proceedings; the first defendant (“Brookfield”) and the fourth defendant (“James”).

Brookfield built the property pursuant to a design and construct contract dated 25 October 2002 (“the Contract”) made between it and the developer, Eastmark Holdings Pty Ltd. Eastmark is in receivership and subject to a deed of company arrangement. It is a defendant, but played no role in the proceedings before me.

James is the sub-contractor of Brookfield that designed and constructed certain elements of the facade of the building, pursuant to a sub-contract agreement (“the Sub-Contract”) dated 23 September 2003.

The works achieved practical completion in accordance with the Contract on or about 21 March 2005, on which date an interim occupation certificate was issued. Further substantial works were subsequently undertaken to levels 35 and 36 by the owners of those lots (and not by Brookfield). A final occupation certificate for those works was issued on or about 4 December 2006.

These proceedings were commenced on 8 March 2012. The Owners Corporation claims damages from Brookfield for breach of contract, and from both Brookfield and James arising from alleged breaches of the statutory warranties in s 18B of the Home Building Act 1989 (NSW) (“the HBA”) and at common law.

The claims generally concern:

In monetary terms, the most significant of those claims is that concerning water ingress through the window assemblies which comprise the facade. The Owners Corporation claims that the whole facade must be replaced at a cost of some $14.8 million.

The Owners Corporation’s claims against Brookfield arise under both the Contract and the statutory warranties in s 18B of the HBA, relying on s 18D(1) of the HBA as a “successor in title” to the developer, Eastmark. Brookfield does not dispute its liability to the Owners Corporation as successor in title to Eastmark, to the extent that the Owners Corporation can establish a breach by Brookfield of the s 18B statutory warranties.

Brookfield accepts that the Owners Corporation has established some such breaches, and is entitled to damages in the order of $720,000. That sum includes some $89,000 to replace 31 window glazing assemblies (which it accepts have been shown to leak) and some $320,000 in respect of urgent works done in 2012 (including repairs to leaking windows).

There is no dispute that, at the relevant time, the warranty under s 18B(a) (as it was at the date of the Contract) of the HBA obliged Brookfield to perform the work in a proper and workmanlike manner. It also obliged Brookfield to construct the works “in accordance with the plans and specifications set out in the contract”. One of those “specifications” was that the facade be designed and constructed in accordance with a “Facade Specification” prepared by Hyder Consulting (Australia) Pty Ltd (“the Hyder Specification”). The nature of Brookfield’s obligations under the Hyder Specification is a major, if not the major, issue in the proceedings. It involves the proper construction of that document. I deal with it below.

There was a warranty under s 18B(b) (as it then was) of the HBA that materials supplied will be “good and suitable” for the purpose for which they are used. The Owners Corporation contends that the effect of this warranty was that the elements of the facade supplied had to create a facade that was weather tight. Brookfield does not dispute this.

There was also a warranty under s 18B(f) (as it then was) that the work and materials used in doing the work must be reasonably fit for purpose. So far as concerns the facade, the Owners Corporation’s case is that the effect of this warranty was that the facade had to be built so that it would not leak.

The Owners Corporation also alleges that Brookfield owed it a common law duty to carry out the design and construction of the building and/or supervise, coordinate or manage the design and construction of the building such that the building, when complete, would:

Brookfield contends that, by reason of the decision of the High Court in Brookfield Multiplex Ltd v Owners – Strata Plan No 61288 [2014] HCA 36 (which I shall refer to in these reasons as “Brookfield”), no such duty of care arises.

The Owners Corporation’s claim against James relates only to the facade issue. The claim is made under s 18D(1A) of the HBA and at common law. The Owners Corporation contends that James owed it a duty of care in the same terms as that alleged against Brookfield.

As to the claim under the HBA, James contends that it is not maintainable under s 18D(1A), and that, in any event, any such claim is brought out of time and is statute barred. James also contends that by reason of the High Court decision in Brookfield, it owed no duty of care to the Owners Corporation.

Brookfield brought a cross-claim against James. The cross-claim received little attention during the hearing. I understood it to have led to agreements between Brookfield and James, to which I refer below (at [225]), concerning the sharing of certain repair costs.

Mr Corsaro SC appeared with Mr Thomas for the Owners Corporation. Mr Ashhurst SC appeared with Mr Hicks for Brookfield. Mr Miller SC appeared with Mr Purdy for James.

The hearing occupied 18 days, including four days for opening and closing submissions and one day for an inspection of the property (on 5 August 2015). The remaining dates were spent on evidence, the vast bulk of which was concurrent expert evidence.

Both before and after final oral submissions (heard on 16 and 17 September 2015), I received very detailed written submissions from the parties. Those submissions included detailed schedules, often of a highly technical nature, summarising the parties’ competing contentions and references to the evidence. I have been greatly assisted by those submissions. Much of what follows, especially as to uncontroversial background matters, is drawn, with gratitude, from them.

In light of the large number of issues ventilated in the proceedings, many of which are of a highly technical nature, I proposed to counsel that I publish a preliminary judgment dealing with the major matters in contention, especially as to matters of principle. This is in the hope (indeed expectation) that the remaining issues can be narrowed, resolved or referred out for final determination. During final oral submissions, I circulated a note setting out issues which could appropriately be dealt with in such a preliminary judgment. Counsel were content that I deal with those issues in these reasons (without necessarily committing themselves to the course that should be followed once the preliminary judgment is published).

One matter that has been thereby deferred is the Owners Corporation’s claims against the defendants other than Brookfield and James (which claims received almost no attention during the hearing before me).

The Contract comprised a “Formal Instrument of Agreement” together with “Amended General Conditions of Contract for Design and Construct” based on AS4300-1995.

The operative provisions of the Formal Instrument of Agreement were included cll 1 and 2, which provided:

The detail of the parties’ obligations was set forth in the Amended General Conditions of Contract for Design and Construct.

Clause 3.1(a) of that document provided that Brookfield:

Clause 4.1 provided:

The Contract thus, in terms, incorporated the statutory warranties in s 18B of the HBA, relevantly that:

As I have said, for the purposes of the warranty under s 18B(a) of the HBA, the “specifications set out in the contract” included that the facade of the building would be designed and constructed in accordance with the Hyder Specification.

The Owners Corporation’s case is that the facade does not comply with the Hyder Specification (because of leaks), and is not reasonably fit for purpose as per the warranty in s 18B(f) for the same reason.

Thus, the proper construction of the Hyder Specification is a critical issue in the case.

As I have mentioned, Brookfield accepts that it has some liability to pay damages to the Owners Corporation.

It is common ground that the principles governing the remedy for defective building work are those set out by the High Court in Bellgrove v Eldridge [1954] HCA 36; 90 CLR 613.

Mr Ashhurst summarised the principles (in a manner which I understand to be uncontroversial) as follows.

Assuming that each of loss and damage, breach and a relevant causal connection is established, Bellgrove v Eldridge is authority that the measure of damages for alleged defective work is the reasonable costs of rectification, and that:

In Tabcorp Holdings Ltd v Bowen Investments Pty Ltd [2009] HCA 8; 236 CLR 272, the High Court stated that the test of “unreasonableness” is only to be satisfied “by fairly exceptional circumstances”, for example where the innocent party was “merely using a technical breach to secure an uncovenanted profit” (at [17], citing Oliver J in Radford v De Froberville [1977] 1 WLR 1262).

Another circumstance in which “unreasonableness” may be established is where the cost of the “proposed rectification is out of all proportion to the benefit to be obtained” (Brewarrina Shire Council v Beckhaus Civil Pty Ltd [2006] NSWCA 361 at [82]-[88], citing South Parklands Hockey & Tennis Centre Inc v Brown Falconer Group Pty Ltd [2004] SASC 81 at 90; see also Wheeler v Ecroplot Pty Ltd [2010] NSWCA 61 per Macfarlan JA (with whom McColl and Basten JJA agreed) at [81]).

By the Sub-Contract, James agreed to:

The Sub-Contract sum was $4,016,736.

James did not supply all of the elements of the facade. It supplied the aluminium and glazing window elements and doors, as well as the aluminium curtain wall elements. It did not design or supply the pre-cast panels, the fibre cement sheeting or the balconies.

The Hyder Specification was also incorporated into the Sub-Contract, albeit in a form different in one material respect to that incorporated into the Contract. I discuss this further below.

Before turning to the detail of the Hyder Specification, I will deal with the Owners Corporation’s claim against James under the HBA and the question of whether either Brookfield or James owed the Owners Corporation a common law duty of care of the kind contended for.

Sections 18C, 18D(1) and 18D(1A) are, relevantly, in the following terms:

“Non-contracting owner” is defined in Schedule 1 of the HBA as follows:

As I have said, the Owners Corporation’s claim against James is made under s 18D(1A).

The Owners Corporation claims that:

That would be a dramatic result. If a developer is a “non-contracting owner” vis-à-vis its builders’ sub-contractors, it would also be a “non-contracting owner” vis-à-vis that sub-contractor’s sub-contractors, and that sub-contractor’s sub-contractors, and so on ad infinitum. It would mean that an Owners Corporation, as successor in title to a developer, would be entitled to pursue for breach of s 18B warranties not only the builder that contracted with the developer, but the builder’s sub-contractors, the sub-contractor’s sub-contractors and so on.

In my opinion, the Owners Corporation’s contentions are not correct. Eastmark was not a “non-contracting owner” vis-à-vis the Sub-Contract.

The definition of “non-contracting owner” directs attention to the entity (here, relevantly, the “corporation”: Eastmark) that is the “owner of the land”, and includes “any successor in title” to that entity. The “land” referred to must be the “land” to which the contract to do residential building work relates (hence the opening words of the definition: “in relation to a contract to do residential building work on land”). That entity (and thus its successor in title) is a “non-contracting owner” it if is not a party to that contract; that is, the contract to do residential building work on the land owned by that entity.

Thus, s 18D(1A) speaks of a person who is a non-contracting owner “in relation to a contract to do residential building work”. That contract must be the same contract referred to in the definition of “non-contracting owner”; namely, the contract to which the “non-contracting owner” is not a party. That must be the contract to do residential building work on that party’s land; the building contract. Not a sub-contract to the building contract.

Had a joint venturer of Eastmark, rather than Eastmark itself, been party to the Contract (as happened in Ace Woollahra Pty Ltd v The Owners – Strata Plan No 61424 [2010] NSWCA 101; 77 NSWLR 613), the effect of s 18D(1A) would be to give Eastmark, as the owner of the land, and the Owners Corporation as its successor in title, the benefit of the s 18B statutory warranties vis-à-vis Brookfield.

Indeed, s 18D(1A) and the definition of “non-contracting owner” were introduced into the HBA to achieve just that result. The second reading speech and explanatory notes to the legislation which introduced s 18D(1A) and the definition of “non-contracting owner” into the HBA (the Home Building Amendment (Warranties and Insurance) Act 2010 (NSW)) make clear that the intended effect of the new provisions was to overcome the effect of the Court of Appeal’s decision in Ace Woollahra. The effect of that decision was, to adopt the words of the explanatory notes, “that only a contracting party and any successors in title to that person are entitled to enforce the statutory warranties under Part 2C of the [HBA]…”.

The explanatory notes continued:

But here, as Eastmark was a party to the Contract, s 18D(1A) has no work to do. It does not give Eastmark any right against sub-contractors of Brookfield. The Owners Corporation cannot be in any better position.

I find this conclusion apparent from the language used in the definition of “non-contracting owner”. It is confirmed by consideration of the avowed legislative purpose of the provisions.

In its reply closing submissions, the Owners Corporation referred to s 3A(1A) and s 18C(2) of the HBA and argued that these subsections “bridge the last gap between” the Owners Corporation and James.

Section 3A of the HBA is in the following terms:

I found the Owners Corporation’s reply closing submissions somewhat opaque on this point and asked for clarification. In response, the Owners Corporation provided further closing written submissions. Those submissions did not assist me to understand the Owners Corporation’s argument.

Section 3A(1A) only applies in the circumstances set out in s 3A(2). For the purposes of considering the Owners Corporation’s argument, I have assumed that four or more of the proposed dwellings at Beau Monde were to be owned by Eastmark, such that s 3A(2)(a), and thus s 3A(1A), is enlivened.

In those circumstances, I understand that, in the context of the facts of this case, the effect of s 3A(1A) is that James is deemed to have done the residential building work at Beau Monde on behalf of Eastmark, and that Eastmark (as the owner of the land) is deemed to be a developer.

But that seems a moot point. Here, Eastmark was actually the developer. I fail to see what extra work s 3A(1A) does that is relevant to this case.

The terms of s 18C(2) are set out at [46] above. The effect of s 18C(2) (when read with s 18C(1)) is that the Owners Corporation, as immediate successor in title to Eastmark (the “developer on whose behalf residential building work [was] done” under s 3A), is entitled to the benefit of the statutory warranties as if Eastmark had done the work under a contract with the Owners Corporation. The statutory warranties referred to must be those in the Contract that s 18C deems to exist between the Owners Corporation and Eastmark: that is, statutory warranties by Eastmark in favour of the Owners Corporation.

However, I fail to see how these sections have the effect of giving the Owners Corporation rights against James as a sub-contractor.

Alternatively, the Owners Corporation argued that the expression “successor in title” in s 18C of the HBA includes Eastmark as a “successor in title to the work” done at Beau Monde by James under the Sub-Contract. The Owners Corporation contended that it then, in turn, itself became a “successor in title to the work”.

That submission was not developed. It cannot be right. The reference to “successor in title” in the HBA must mean “successor in title” to the land. There is no textual support in the language of the statute for any other conclusion.

My conclusion is that the Owners Corporation has no rights against James under the HBA. The Owners Corporation’s claim against James under the HBA therefore fails.

In any event, if, contrary to those conclusions, the Owners Corporation was entitled to bring a claim against James for breach of the HBA statutory warranties, such claim has been brought out of time and is statute barred.

The limitation period applicable to s 18B warranties was, at the relevant time (the date of the Sub-Contract), seven years from “completion”.

Thus, at that time, s 18E of the HBA provided that:

Section 3B of the HBA currently provides:

Section 3B is applicable to this case: see Schedule 4 s 106 of the HBA. The Owners Corporation accepted the section had retrospective effect, albeit “not so as to affect any finalised litigation or claims or any claims or litigation currently under way”. That qualification is not relevant, as these proceedings had not commenced on the date s 3B was introduced into the HBA.

James referred to s 3B in its written closing submissions. Mr Miller emphasised in oral submissions what he submitted to be its effect. The Owners Corporation twice referred to s 3B in that part of its closing reply submissions that addressed James’s contention that the Owners Corporation’s claim against it under the HBA (if maintainable at all) was out of time. And yet the Owners Corporation did not address, nor attempt to engage with, James’s submissions as to the vital role s 3B plays in James’s case; namely, that the HBA claim is out of time. Although at the outset of its submissions on this issue the Owners Corporation recited James’s submissions (which contained a reference therein to s 3B), it did not further deal with s 3B.

Section 18E speaks of “completion of the work” to which the “proceedings for a breach of a statutory warranty” relates.

Section 3B(1) speaks of completion within the meaning of the “contract under which the work was done”.

The sections thus direct attention to when completion took place under the contract that is said to give rise to the claim for breach of statutory warranty.

Here, that contract is the Sub-Contract. The Owners Corporation’s claim against James (assuming it is maintainable at all) relates to work that James did under the Sub-Contract. Thus, the seven year period under s 18E must run from the date when completion took place under the Sub-Contract, and not from when completion took place under the Contract.

In that regard, in its reply submissions, the Owners Corporation referred to the observations of the Court of Appeal in The Owners – Strata Plan No 64757 v MJA Group Pty Ltd [2011] NSWCA 236; 81 NSWLR 426 and in Vero Insurance Ltd v Kassem [2011] NSWCA 381.

I see nothing in those decisions which is inconsistent with the conclusions to which I have come.

On the contrary, in Vero v Kassem Campbell JA said, at [67]:

In its reply submissions, the Owners Corporation said that “it does not agree with Campbell JA’s view” and that his Honour’s observations were obiter dicta. I do not agree that what Campbell JA said was obiter. It was central to his Honour’s reasoning process in the proceedings. And if the Owners Corporation was suggesting that his Honour was in error, then I disagree.

As set out at [73] above, s 3B of the HBA provides guidance as to when “completion” of the Sub-Contract is taken to have occurred.

The Sub-Contract did not state when “completion” was to take place. Accordingly, s 3B(1) is not applicable.

Thus, the effect of s 3B(2) and (3) of the HBA is that completion is taken to occur on “practical completion of the work”, which is defined in s 3B(2) as being:

By virtue of s 3B(3)(b), practical completion is presumed to be, relevantly:

The Sub-Contract contained a similar provision:

The date on which James last attended the site to carry out work (other than work to remedy a defect not affecting practical completion) was some time in February 2005.

Thus, on 3 February 2005, Brookfield sent James a “Subcontractor Warranty Deed Poll”, under cover of a letter which stated:

On 15 February 2005, James wrote to Brookfield enclosing the Warranty Deed Poll, duly executed, together with its “standard Warranty & Glazing Certificates and Maintenance Manuals” for the Beau Monde project.

The Warranty Deed Poll provided for a seven year warranty that:

On 25 February 2005, James sent Brookfield a payment claim under the Building and Construction Industry Security of Payment Act 1999 (NSW) which described all work as being 100 per cent complete.

That suggests that practical completion of the Sub-Contract took place, at the latest, by 25 February 2005. In my opinion, the seven year period under the former s 18E of the HBA ran from, at the latest, this stage. It thus expired on or about 25 February 2012.

There is in evidence a note made by Mr Glen Gilligan, one of James’s project managers, on 7 April 2005.

The note refers to the “last lot of defects from Beau Monde” in respect of which he wrote “most are scratches”. That note suggests some minor defect work (to rectify “scratches”) was done in April 2005. However, it does not alter my conclusion that practical completion took place earlier.

The Owners Corporation commenced proceedings against James on 8 March 2012. Thus, the proceedings, if maintainable at all, are out of time.

The Owners Corporation contends that Brookfield and James owed it a duty of care of the kind set out at [16] above.

So far as concerns Brookfield, the point is probably of little practical significance, as it is in any event liable to the Owners Corporation under the Contract and by reason of s 18C of the HBA. That may explain why Mr Ashhurst did not offer any detailed submissions on the question.

However, so far as James is concerned, the point is of vital significance. It has no contractual relationship with the Owners Corporation and, as I have found, no liability to the Owners Corporation by reason of the HBA.

The circumstances in which the common law imposes a duty of care to avoid pure economic loss were very recently reviewed by McDougall J in Chan v Acres [2015] NSWSC 1885. His Honour’s summary of the present state of the law in this area (at [93] to [156] is pellucid: I could not possibly improve on it. His Honour was, however, dealing with a factual situation different to that here. In Chan, the owner of a house in Wahroonga sued his vendor, who had carried out significant renovations as an owner builder, the engineer that had inspected the work on the vendor’s behalf, and the local council (which was the principal certifying authority). His Honour held that, in the particular circumstances of the case, the engineer owed no duty to the plaintiff (at [255] but that the council did owe such a duty (at [373]).

In this case, the Owners Corporation is immediately confronted with the decision of the High Court in Brookfield.

In that case, in circumstances similar to, but not exactly the same as, those in this case, the relevant owners corporation claimed that Brookfield owed it a duty to exercise reasonable care in the construction of a strata complex. The duty alleged was to avoid causing the owners corporation economic loss resulting from latent defects in the common property. The seven Justices of the Court delivered four judgments. Each rejected the owners corporation’s contentions and held that Brookfield owed it no duty of care.

The Owners Corporation contends that Brookfield is distinguishable from this case. In my opinion, although the facts in Brookfield were a little different to those here, the reasoning of the High Court compels the conclusion that neither Brookfield nor James owed the Owners Corporation a duty of the kind contended for in this case.

In Brookfield, the circumstances were that:

Although the Court delivered four sets of reasons, each member of the Court held that the question of the owners corporation’s vulnerability to the possibility of economic loss arising from Brookfield’s construction of the building was the critical factor in determining whether a duty of care arose as between the parties: see French CJ at [22] and [23]; Hayne and Kiefel JJ at [51]; Crennan, Bell and Keane JJ at [130]; and Gageler J at [185].

Thus, French CJ, referring to Perre v Apand Pty Ltd (1999) 198 CLR 180 at [118] per McHugh J, said at [22]:

Hayne and Kiefel JJ, referring to the Court’s earlier decision in Woolcock Street Investments Pty Ltd v CDG Pty Ltd [2004] HCA 16; 216 CLR 515, said at [51]:

Similarly, Crennan, Bell and Keane JJ said at [130]:

Gageler J (at [182]) referred to the observation of McHugh J at [94] of Woolcock Street that:

Each member of the Court concluded that the owners corporation was not relevantly vulnerable, essentially because those that the owners corporation represented were adequately protected by contract and were sophisticated investors.

Hayne and Kiefel JJ said (at [55] and [58]):

Crennan, Bell and Keane JJ went further, stating at [150]:

The notion that an owners corporation suffers no loss at all in circumstances such as these was also raised, but not resolved. Thus Crennan, Bell and Keane JJ continued:

In its closing submissions, the Owners Corporation advanced a number of reasons for distinguishing Brookfield from this case.

The first was that, in this case, “there is no sophisticated building contract…and…no contract regulating the rectification of defects”.

I cannot understand how the Owners Corporation put that submission. There is a “sophisticated building contract”; namely, the Contract. The Contract contains detailed provisions concerning defects and a 12 month liability period.

The second reason was that, the Owners Corporation submitted, “the simple fact is that the builder and the developer are the same entity”.

Again, I cannot understand how the Owners Corporation put that submission. In this case, the builder was Brookfield. The developer was Eastmark. There is no relationship between those two companies. They are certainly not the “same entity”.

The third reason was that in this case:

However, that has not been established. The contracts whereby lot owners acquired their lots in Beau Monde are not in evidence.

Fourth, the Owners Corporation submitted that, unlike the circumstances of Brookfield, in this case:

But there is no evidence as to the identity of lot owners at Beau Monde.

It is true that, unlike the position in Brookfield, there is no suggestion in these proceedings that any part of Beau Monde was to operate as serviced apartments, nor that any person acquired their lot in Beau Monde on this basis. But nor is there any other evidence as to the basis upon which lots were acquired. Beau Monde comprises 241 residential lots. Some lot owners may be owner-occupiers. But others may well be investors.

And there is a further factor, which I find decisive. Unlike the owners corporation in Brookfield, the Owners Corporation in this case has the benefit of the statutory warranties under the HBA.

In Brookfield, Crennan, Bell and Keane JJ said at [133]:

It is common ground that the Owners Corporation has the benefit of that statutory protection. As successor in title to Eastmark, it is entitled to bring proceedings against Brookfield relying on the statutory warranties in the HBA. As I have set out above, that is exactly what it has done in these proceedings; and Brookfield has conceded some liability on that basis.

As the trial judge in Brookfield (McDougall J, whose decision was ultimately upheld in the High Court) emphasised, the owners corporation in that case did not have the benefit of the statutory regime under the HBA (Owners Corporation Strata Plan 61288 v Brookfield Multiplex Ltd [2012] NSWSC 1219 at [86]). His Honour referred to his Honour’s earlier observations in the “Star of the Sea” case (Owners Corporation Strata Plan 72535 v Brookfield Multiplex Ltd [2012] NSWSC 712), and said:

In the Star of the Sea case, his Honour opined at [144]:

His Honour expressed a similar view in Chan v Acres at [370] – [371], and observed that the joint judgment in Woolcock Street at [35] and the judgment of Gageler J in Brookfield at [186] appeared to support the same proposition. However, in the particular circumstances before his Honour, he did not find that consideration decisive.

In my opinion, the fact that the statutory warranties under the HBA are available to the Owners Corporation makes this an even stronger case than Brookfield for denying the existence of a duty of care owed by Brookfield to the Owners Corporation. It points strongly to the conclusion that the Owners Corporation is not vulnerable in the relevant sense.

It also provides a powerful basis to deny that James owed a duty to the Owners Corporation. The availability to the Owners Corporation of statutory warranties against Brookfield points to the conclusion that it is not vulnerable to any defective workmanship by Brookfield’s sub-contractor (for whom, vis-à-vis the Owners Corporation, Brookfield is responsible).

The Owners Corporation referred to the decision of the Victorian Court of Appeal in Moorabool Shire Council v Taitapanui [2006] VSCA 30. That case concerned a council said to be vicariously liable for the conduct of a building surveyor that it employed. The surveyor had certified that the foundations of a dwelling were sound. The foundations later collapsed due to a critical design flaw. The successors in title to the owners of the dwelling at the time of its certification sued the council for economic loss.

The Owners Corporation referred, with little elaboration, to the observations of Ormiston and Ashley JJA (at [181]) in that case that the statutory warranties implied by the Victorian equivalent of the HBA (the Domestic Building Contracts Act 1995 (Vic)) into the relevant building contract (which ran in favour of the successors in title) were not effective, in the circumstances of that case, to “displace the common law as it should otherwise apply in respect of the quite different conduct” of the surveyor.

However, the circumstances before their Honours were quite different to those before me. In any event, the decision was made well before the High Court’s decision in Brookfield. I do not see how their Honours’ observations cast any light on the question before me.

The Owners Corporation also referred to The Owners Corporation – SP 69567 v Landson Alliance Australia Pty Limited [2014] NSWSC 1592 in which, shortly after the decision of the High Court in Brookfield, McDougall J refused to strike out a negligence claim by an owners corporation against a builder.

It is true that McDougall J declined to strike out the claim. However, this was at an interlocutory stage of proceedings. His Honour observed at [59] that the owners corporation would face “an extremely difficult case at trial” to distinguish its case from Brookfield. His Honour also observed that the decision in Brookfield placed “very formidable obstacles” in the owners corporation’s “path to success” (at [60]).

My conclusion is that the High Court’s decision in Brookfield is not relevantly distinguishable from this case. Indeed, to the extent that I have mentioned, this case seems an even stronger one in which to deny the existence of a duty of care of the kind contended for.

So far as concerns the facade, the critical matter dividing the parties is the proper construction of the Hyder Specification.

As I have said, the Owners Corporation’s case is that the facade needs to be replaced. The Owners Corporation contends that the total cost of the necessary facade works, including replacement of windows, balcony doors and curtain walls, is in the order of $14.8 million.

That claim assumes the correctness of the proposition advanced by the Owners Corporation that, on its proper construction, the Hyder Specification (and thus the Contract) requires that the facade be designed and constructed to be “fully weather tight”, such that it would be able to pass a water test of the kind described in AS 4284 “at least during the 25 year period before the ‘first major maintenance’” referred to in the specification.

The Owners Corporation adduced a considerable body of evidence of water testing on some parts of the facade, principally from an engineer, Mr Peter Lalas. That water testing has caused water ingress through the relevant window assembly elements, and into the apartments in which those window assemblies are installed.

The relevance and appropriateness of those water tests depends upon whether the Owners Corporation’s construction of the Hyder Specification is correct.

Accordingly, I will now consider the provisions of the Hyder Specification and the terms of AS 4284 (and two other relevant standards), before dealing with the proper construction of the Hyder Specification.

The Hyder Specification is described as a “Performance Specification”.

Thus, cl 1.1 states:

Clause 1.2 describes “the Project” and states, relevantly:

Clause 1.3 deals with the “Scope of Work” and states:

Clause 1.5 is headed “Contractor’s Responsibilities” and states:

Clause 1.7 is headed “Warranty” and states:

Clause 3 is headed “Performance Requirements” and states:

Those parameters are set out in a table, the relevant parts of which are as follows:

Clause 5 is headed “Verification” and includes the following:

Clause 5.2.2 provides:

The Hyder Specification as incorporated into the Sub-Contract did not include, relevantly, cl 5.2.1. Evidently, that was because, as I have mentioned, James did not design and construct every element comprising the facade.

The Hyder Specification referred to AS 4284 and AAMA 501.2.

Australian Standard AS 4284 is entitled “Testing of building facades”.

The standard is said to be based on a “Specification for the performance testing of building facades by the Sirowet method” published by the Commonwealth Scientific and Industrial Research Organisation.

The parties refer to testing undertaken in accordance with this standard as “Sirowet testing”.

The preface to the standard states:

The standard describes its “scope” as follows:

Clause 6 of the standard deals with “sample preparation” and refers to a “test sample” which:

The standard specified a “test sequence” for the samples which was to be “conducted prior to the structural test”.

Appendix A dealt with “sample preparation” and stated:

It is apparent from the words of AS 4284, particularly those emphasised in the last paragraph, that, as Brookfield submitted, the standard is directed to the testing of samples and prototypes in the context of the adequacy of design. It is not directed to the construction work undertaken or the present performance of buildings later in their life. I accept the submission advanced on behalf of James that the reading of the standard suggests that it is not intended to operate as a diagnostic performance testing tool for an aged facade.

The standard does not, in terms, state that it is appropriate or suitable for use on aged facades. Indeed, it refers to the performance of a “representative building facade” (see [161] above) and the testing of samples “under exposure to simulated environmental conditions before production commences”.

AAMA 501.2 is a document published by the American Architectural Manufacturers Association (“the AAMA”).

The AAMA describes itself as “the Source of Performance Standards, Products Certification and Educational Programs for the Fenestration Industry”.

In concurrent evidence, Brookfield’s facade expert, Mr Peter Karsai, agreed that AAMA standards are “industry written standards” prepared “by industry for the guidance of industry”, and are “quite often referred to when a gap presents within the Australian standards”.

As I discuss below, Mr Lalas spoke somewhat dismissively of the AAMA. However, the fact is that AAMA 501.2 is referred to in the Hyder Specification and was obviously thought by the authors of that document to be appropriate for inclusion. Intriguingly, Mr Lalas is described on the Hyder Specification as its “checker” (although he denied in fact checking it). Further, as I discuss below, Mr Lalas himself used a modified form of AAMA 501.2 on the window assemblies at Beau Monde.

The AAMA describes standard 501.2 as follows:

The Hyder Specification recommends an “AAMA 501.2 field hose test standard” as part of “site water testing”.

The standard makes clear that it is not appropriate for testing operable or openable windows and, thus, is only appropriate for testing permanently closed fenestration systems.

AAMA 511.08 is not referred to in the Hyder Specification. It was, however, used by Brookfield’s experts to test the Beau Monde window assemblies and it is convenient to mention it here.

AAMA 501.2 nominates AAMA 511 as the appropriate test for “forensic water penetration testing” of building windows. That is made clear from the wording of AAMA 501.2 itself (see [171] above).

AAMA 511.08 states:

Under the heading “Scope and Purpose” the standard provides:

Later, the standard states:

Under the heading “Forensic Investigation Steps from Testing to Report” the standard states:

The Hyder Specification forms part of both of the relevant design and construct contracts: the Contract and the Sub-Contact. As I have set out, it states, in its opening words, that it is a “performance specification”. And, consistently with its incorporation into design and construct contracts, it states that it establishes “the minimum acceptable standard to which the facade must be designed, fabricated, installed and tested” (see [146] above).

The specification refers, on five occasions, to “weathertightness”.

First, it imposed on Brookfield and James as “the contractor” a “responsibility” to “design, engineer, test, fabricate, deliver, install, maintain and guarantee” a “complete and fully weather tight” cladding system (cl 1.5 set out at [149] above).

Second, it provided that the contractor would give a 10 year “warranty” from the date of practical completion “for the structural integrity and weathertightness of the facade systems” (cl 1.7 set out at [150] above).

Third, it specified that the contractor “design the facade system” in accordance with “performance parameters”. Those parameters included a “design life” of 50 years “for structural integrity” and 25 years “to first major maintenance”, and that the cladding be “fully weathertight” when tested “in line” with AS 4284 requirements (cl 3 set out at [151] and [152] above).

Fourth, under the heading “Verification”, it obliged Brookfield (but not James) to conduct “prototype testing” in accordance with AS 4284 for “structural adequacy and weathertightness of the various facade systems” (or alternatively, to arrange for an independent testing laboratory to do so) (cl 5.2.1 set out at [153] above).

Fifth, again under the heading “Verification”, it obliged both Brookfield and James to conduct 10 “hose tests” on “random areas” in accordance with AAMA 501.2, in order to “demonstrate weathertightness of the installation” (cl 5.2.2 set out at [154] above).

My attention was not drawn to any authorities dealing with the meaning of “weather tightness”. My own research has not revealed any such authority.

Absent authority on the subject, I would construe “weather tight” to mean able to withstand any weather likely to be encountered in natural conditions. In these proceedings, the question of weather tightness is in respect of water ingress. In my opinion, in order for the facade to be weather tight, it had to be designed and constructed so as, relevantly, to prevent water entry into the habitable areas of the building (assuming the windows were closed) during any rain or storm events likely to be encountered in the part of Sydney where the building is located. As I understand it, each of the parties, and their expert facade witnesses (Mr Lalas for the Owners Corporation, Mr Karsai and Mr Timothy Womack for Brookfield, and Mr David Hunton for James), were agreed on this.

The plaintiff’s submissions focussed on cl 3 of the Hyder Specification and, in particular, item 12 of the table at cl 3 (see [152] above).

Thus , its closing submissions, the Owners Corporation submitted:

The Owners Corporation put that submission as applying “at least” during the first 25 years of the building’s “design life”. However, if the submission is right, it must also apply for the second 25 years of the building’s design life; that is, for the entire design life of 50 years (see [152] above).

Thus, the effect of the Owners Corporation’s submission is that, if at any time during the period of 50 years from when the building was constructed (that is, from 2005 to 2055) the facade was subjected to an AS 4284 water test, it should be “fully weathertight”; that is, it should not permit water ingress during such testing.

That submission really amounts to a submission that the Hyder Specification should be construed as if the contractor warranted or guaranteed that the facade would be fully weather tight when tested in accordance with AS 4284 for 50 years.

Clause 3 of the Hyder Specification is directed to the performance parameters in accordance with which the facade must be designed. The words that I have emphasised in the Owners Corporation’s submission (“and constructed”) introduce into cl 3 an element that is not there. Clause 3 does not, in terms, require that the facade be designed “and constructed” to have the design life specified or to be “fully weathertight when tested in line with the requirements of AS4284”. Clause 3, in my opinion, sets out the performance requirements for the design of the facade, and not the performance requirements of the facade itself.

In that context, the reference to AS 4284 in relation to design is consistent with the evident object of AS 4284 which, as I have set out above, is directed to the testing of samples and prototypes in the context of the adequacy of design.

The clause of the Hyder Specification that is directed to the manner in which the facade was to be constructed (that is, the performance requirements of the facade itself) is cl 1.5 (although that clause does also refer to “design”).

As I have set out, cl 1.5 imposed on Brookfield (and James) the responsibility to “design, engineer, test, fabricate, deliver, install, maintain and guarantee” a facade that was “fully weather tight”. Although the clause states what the contractor must “maintain and guarantee” (a “fully weather tight, cladding system”), it makes no reference to AS 4284, nor to the need for weather tightness to be manifest “when tested” in accordance with AS 4284.

The reference in cl 1.5 to what Brookfield (and James) “guarantee” directs attention to cl 1.7.

Clause 1.7 provides a warranty for the “structural integrity and weathertightness” of the facade system. This must be the “guarantee” referred to in cl 1.5. That warranty is simply for “weathertightness”: not that the facade be weather tight “when tested” in accordance with AS 4284. And the warranty is for 10 years, not the “design life” of the building (50 years for “structural integrity” and 25 years “to first major maintenance”).

The Owners Corporation submitted that there is a distinction between a contractual warranty such as cl 1.7 and a contractual promise to achieve what cl 3 of the Hyder Specification required. In that regard, Mr Corsaro drew attention to the distinction drawn by Dixon J in Larking v Great Western (Nepean) Gravel Limited (in liq) [1940] HCA 37; 64 CLR 221 at 236-8 between a promise to do “a definite act” and one to “maintain a state or condition of affairs”.

So much may be accepted. But one may inform the proper construction of the other.

My task is to determine what a reasonable businessperson would have understood the Hyder Specification to mean. This involves consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purposes or objects to be secured by the contract (Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; 251 CLR 640 at [35]; Mount Bruce Mining Pty Limited v Wright Prospecting Pty Limited [2015] HCA 37 at [47]).

In my opinion, a reasonable businessperson, reading cll 1.5 and 1.7 together, would understand that what the contractor was promising to do was design and construct the facade and to “guarantee” that, when constructed, it would be “fully weathertight”. In addition, the contractor was promising to “guarantee” and “provide a warranty” that it would remain weather tight for 10 years.

The contractor also warranted the “structural integrity” of the facade for 10 years; not for the 50 year “design life” referred to in cl 3.

If the effect of cl 3 was as the Owners Corporation submitted, cl 1.7 would have no work to do; the warranty given for structural integrity and weather tightness in cl 1.7 would be subsumed by the obligation in cl 3.

I cannot accept that this was what the parties intended, or that a reasonable businessperson would read the Hyder Specification as having this effect.

In my opinion, what the contractor was promising in cl 3 was to design the facade so that it would have a design life of the type specified and, when tested in the circumstances contemplated by AS 4284 (“in line with the requirements of”), it would then be “fully weathertight”. The circumstances contemplated by AS 4284 are, in my opinion, those existing at the time of construction; not later. I accept Mr Miller’s submission that the design requirement in cl 3.1 was to provide cladding capable, when constructed, of being fully weather tight such as to pass an AS 4284 test at that time.

That conclusion is, in my opinion, consistent with the provisions in cll 5.2.1 and 5.2.2 for prototype and site testing in accordance with AS 4284 and AAMA 501.2 respectively. Those were tests to be conducted, as part of the “verification” of the facade, at the time of its design. As Mr Ashhurst submitted, those provisions in effect provide for a quality control process.

The facade experts called by the parties (Mr Lalas for the Owners Corporation, Mr Karsai and Mr Womack for Brookfield, and Mr Hunton for James) agreed that:

Each of the parties has called expert observational evidence as to the extent of water ingress in the Beau Monde building.

The evidence adduced on behalf of the Owners Corporation included four reports prepared by an engineer, Mr Nicholas Joannides.

Mr Joannides’s first report was dated 3 April 2013. It is some 1,900 pages long and took up four volumes of the court book. In the report, Mr Joannides recorded his observations as to water ingress. He did so on an apartment by apartment basis, based upon his inspection of 220 of the 241 apartments in the building between February 2012 and March 2013. Mr Joannides prepared a further report on 11 April 2014 in which he said he had inspected a further three apartments. Thus, the total number of apartments that Mr Joannides inspected was 223 out of the 241 in the building.

In response, Brookfield adduced evidence from Mr Karsai, also an engineer and a specialist cladding consultant. Mr Karsai also gave expert observational evidence. In a report dated 26 February 2015, he concluded that of the 1,040 window assemblies in the building, 30 had “major moisture related damage” and 45 had “minor moisture related damage to the [Medium Density Fibreboard] sill”.

James adduced evidence from Mr Hunton, a structural engineer. Mr Hunton conducted what Mr Miller described as a “paper review” of Mr Joannides’s reports. Based on that review, in a report dated 26 February 2015, Mr Hunton came to conclusions very similar to those of Mr Karsai.

In reply, Mr Joannides served a further report of 22 May 2015. In that report, he expressed the opinion that there were 35 window assemblies with extensive or excessive water ingress and 54 window assemblies with minor swelling, possibly caused by water ingress.

Shortly after the commencement of the hearing, Mr Joannides, Mr Karsai and Mr Hunton conferred and produced a joint report in which they set out an agreed position. That report became Exhibit K.

The experts agreed that they had not been asked to consider window units in apartments 3501, 3502, 3601 or 3602, nor the window assemblies in the level 8 gymnasium and store room.

Of the remaining 973 window assemblies the experts agreed that:

The Schedule 1 Assemblies are in the following apartments:

There was some debate before me as to whether the experts had agreed that the window assemblies in apartments 1511 and 3301 were Schedule 1 Assemblies. Whether or not the experts so agreed, lay observational evidence of water ingress into these apartments following a major storm event in October 2014 (to which I refer further below) makes clear that these are Schedule 1 Assemblies.

Of the Schedule 1 Assemblies, the nine that have been successfully repaired are those in apartments:

The Balcony Assemblies (which, it is common ground, are the responsibility of Brookfield and not James) are in the following apartments:

Brookfield accepts that the Schedule 1 Assemblies and the Balcony Assemblies either previously required rectification works or require such works in the future.

Brookfield has agreed, on a without admissions basis, to pay for the cost of rectification of the Balcony Assemblies.

As I understand it, Brookfield and James have also agreed to pay for the repair of the Schedule 1 Assemblies that have not already been repaired. I assume this agreement is born of the cross-claim Brookfield has brought against James.

As to the one window assembly in dispute (in unit 2706), as I understand the evidence, none of Mr Karsai, Mr Hunton or Mr Joannides have themselves seen any evidence of water ingress in apartment 2706. Mr Joannides expressed the opinion that this window assembly should be treated as defective based upon his reading of the observations of Mr Bruce Hall, a building consultant. The plaintiff served evidence from Mr Hall. However, because of ill health, he was not able to be called or cross-examined. Mr Karsai disputed the reliability of Mr Hall’s testing on the basis that, as there was no other evidence that there had been water ingress in this apartment, it did not replicate a “real world” experience. I will deal with this aspect further in the course of considering the lay observational evidence.

The Schedule 2 Assemblies are in the following apartments:

So far as concerns the Schedule 2 Assemblies, Mr Karsai’s position was that:

For the most part, Mr Hunton agreed with Mr Karsai. He expressed the opinion that “the minor damage recorded could also be attributed to periodic water entry” caused by the sash windows being left open, doors not being closed, condensation on the windows and frames, or from water from balconies above.

Mr Joannides agreed that some of the minor moisture related damage on the Schedule 2 Assemblies could be due to the effects of periodic condensation or water entry caused by occupier usage (such as sash windows being left open during rain events).

However, Mr Joannides expressed the opinion that manifestation of minor moisture damage in 7.4 per cent of the window assemblies was, in fact, significant, and that overall his view was that there were likely to be other sources of water ingress (beyond condensation) through the facade.

Brookfield and James submitted that, in light of the experts’ conclusions concerning the Schedule 2 Assemblies, the Owners Corporation had not established that those assemblies allow water ingress such that they require rectification.

I will return to consideration of these window assemblies after I have dealt with further evidence relied upon by the Owners Corporation.

At the conclusion of evidence, the Owners Corporation tendered a bundle of emails (Exhibit Z) to and from its building manager and Brookfield which referred to water entry. The emails were in the date range 5 December 2005 to 5 June 2010.

That correspondence refers to 13 apartments in which leaks were reported, including four (1301, 2008, 2806 and 3205) which contain Schedule 1 Assemblies, two (2305 and 2307 (two assemblies)) which contain Balcony Assemblies and six (1303, 2504, 2508, 2702, 2808 and 2908) which contain Schedule 2 Assemblies. There is one apartment (3602) that the experts did not consider.

The Owners Corporation did not attempt, in its submissions, to identify which window assemblies in those apartments are still said to leak, nor the extent of the water ingress in each case.

When the evidence closed, the Owners Corporation had adduced no direct evidence from any occupant of the building reporting the presence of water leaks in an apartment in the building.

This matter was emphasised in final submissions.

Thus, Mr Miller submitted:

On 6 October 2015, several weeks after the conclusion of final oral submissions, and some six weeks after the conclusion of the evidence, the Owners Corporation filed a notice of motion seeking leave to reopen its case to tender a bundle of some 450 pages. The bundle comprised emails from owners and occupants of apartments in the building said to evidence complaints made about water ingress.

In the same notice of motion, the Owners Corporation sought leave to reopen its case to tender a bundle of photographs taken by a professional photographer, Mr James McKinnon, of various window assemblies in the building.

I heard that notice of motion on 9 November 2015 and dismissed it for the reasons I gave in The Owners – Strata Plan No 74602 v Brookfield Australia Investments Ltd [2015] NSWSC 1682.

The Owners Corporation adduced evidence from Mr Michael Gwodz, a facade designer, and from Mr Vasilios Moisidis, a structural engineer, of their observations within various apartments at the Beau Monde complex between June and September 2014. Although both Mr Gwodz and Mr Moisidis have professional qualifications, their evidence was adduced as lay observational evidence.

Both Mr Gwodz and Mr Moisidis swore affidavits on 4 June 2015 setting out the results of their observations. Mr Gwodz deposed to inspecting something in the order of 50 of the 241 apartments in the building. Mr Moisidis deposed to having made some 200 inspections. He inspected some apartments more than once. Overall, Mr Gwodz and Mr Moisidis inspected all, or almost all, of the apartments.

During the course of the hearing, there was dispute as to whether the Owners Corporation should have leave to adduce such evidence, bearing in mind orders that the Court had earlier made as to the deadline for the filing of lay evidence.

For the reasons I gave in my judgment of 11 August 2015 (The Owners – Strata Plan No 74602 v Brookfield Australia Investments Ltd [2015] NSWSC 1144), I gave leave to the Owners Corporation to adduce that evidence save in respect of observations made during or immediately after a significant storm event which occurred in Sydney in April 2015. Photographs taken by various witnesses immediately after that storm event were, however, in evidence. I also allowed evidence of Mr Gwodz’s and Mr Moisidis’s observations following a storm event in October 2014.

As part of its closing submissions, the Owners Corporation included an 184 page schedule which set out, apartment by apartment, references to the observations that Mr Gwodz and Mr Moisidis made.

Very often, the observations were different to those made on behalf of the Owners Corporation by Mr Joannides, and much more extensive than the agreed position reached by Mr Joannides with Mr Karsai and Mr Hunton.

As I said in my reasons of 11 August 2015, that is not surprising. Mr Francesco Andreone, a consultant engaged by the Owners Corporation in relation to these proceedings, gave evidence that both Mr Gwodz and Mr Moisidis were retained by the Owners Corporation in April 2014 to reinspect the apartments because of an apprehension that Mr Joannides had not identified all the indicia of failure to which Mr Lalas directed attention.

The 184 page schedule appears to refer to every apartment in the complex, and contains a reference to where in their affidavits Mr Moisidis and Mr Gwodz gave evidence in respect of the window units in those apartments.

However, the Owners Corporation’s submissions contained no analysis of such evidence, and made no attempt to address the detail of what Mr Gwodz and Mr Moisidis had said.

The Owners Corporation simply submitted that, in light of the observations of Mr Gwodz and Mr Moisidis, and of photographs taken following the April 2015 storm event, there should be added to the Schedule 1 Assemblies the window assemblies in the following apartments:

Nonetheless, I have considered the observations of Mr Gwodz and Mr Moisidis in relation to those 18 apartments.

In addition, the Owners Corporation submitted, without elaboration or analysis, that Exhibit K “did not incorporate or otherwise properly account for evidence of major and minor water ingress” during the October 2014 storm event, nor “take account of the general observational evidence of Messrs Gwodz and Moisidis of signs of water ingress (and other indicia of facade defects)”.

As I have said, there are 241 apartments at Beau Monde. Those apartments contain a total of some 1,040 window assemblies. Absent focussed submissions from the Owners Corporation as to precisely what conclusions I should draw from the evidence of Messrs Gwodz and Moisidis as to the weather tightness of the building, I do not propose myself to engage in a window assembly by window assembly, or apartment by apartment, analysis of the evidence. I am especially disinclined to take this course in circumstances where, to a very large extent, the expert observational witness called by the Owners Corporation (Mr Joannides) has, in conclave, reached agreement with his counterparts (Messrs Karsai and Hunton) as to that very question.

Nonetheless, and despite the lack of specificity of the Owners Corporation’s submissions, in addition to considering the observations of Mr Gwodz and Mr Moisidis in relation to the 18 apartments that the Owners Corporation submitted should be treated as “Schedule 1” apartments, I have also considered the observations that Messrs Gwodz and Moisidis made in relation to other apartments, including:

I reviewed that material with a view to considering whether any of those window units or assemblies should be categorised as “Schedule 1” apartments, and thus Brookfield’s responsibility. That is, despite the manner in which the Owners Corporation has presented this aspect of its case, I have to this extent considered, in light of the observations of Messrs Gwodz and Moisidis, whether I should conclude that there has been water ingress such as to warrant rectification work beyond the Schedule 1 Assemblies and the Balcony Assemblies.

I have approached the evidence given by Mr Gwodz and Mr Moisidis with some care. Mr Gwodz’s observations were based on inspections he conducted between June and October 2014. Mr Moisidis’s observations were based on inspections he conducted over the same period, but also in January 2015. Both also took photographs immediately following the April 2015 storm event. Mr Gwodz and Ms Moisidis each swore their affidavits setting out their observations on 4 June 2015; up to 12 months after the dates of their inspections.

Mr Gwodz said that, at the time of the inspections, he “commenced with taking notes” of what he observed but “it was just repetition so I fell back to just taking photographs”. Such notes as Mr Gwodz took were not in evidence before me. By contrast, Mr Moisidis did take notes as he made his inspections, which were in evidence before me. Some of the statements he made in his affidavit reflect what he recorded in those notes. On other occasions, however, Mr Moisidis made statements in his affidavit, often in some detail, about matters not recorded in his notes.

The impression I gained from both witnesses was that the observations they recorded in their affidavits were based, to a very substantial degree, on the photographs they took at the time, and their review of those photographs shortly before they swore their 4 June 2015 affidavits, rather than any independent memory they had.

Mr Gwodz and Mr Moisidis were cross-examined about some, but by no means all, of their observations. Similarly, in concurrent evidence, Messrs Karsai, Hunton, Joannides and Lalas were asked about only a limited number of apartments and window units.

The observations of Mr Gwodz and Mr Moisidis contain many references to signs of dirt ingress, salt residue, mould growth, the application (evidently by apartment occupiers or others) of sealants, rust and water condensation on and around window assemblies, and swollen and delaminated window sills. There was disagreement between the experts as to the significance of these matters. The experts agreed that each of these matters bespoke some effect of air or water. But the experts were divided on whether these signs were indicative of the window assembly having actually leaked. As Mr Ashhurst submitted, the effect of the evidence of Messrs Joannides, Karsai and Hunton was that these indicia, if observed, would lead to further investigation. But they did not, of themselves, establish that water ingress had occurred nor allow any conclusion to be drawn as to the cause of any water ingress. Unassisted by detailed submissions from the Owners Corporation about these matters, I am unable to attach any relevant significance to them.

However, where Mr Gwodz or Mr Moisidis have observed direct signs of water ingress on the components of a window unit within an apartment (that is, water actually present on the inside of the window units), I am persuaded that, on the probabilities, water has made its way through the window assemblies into the apartment.

Very often, Mr Gwodz and Mr Moisidis referred to dried water drips or marks. I am reluctant to draw any conclusions from those observations for three reasons.

First, the Owners Corporation directed no submissions to me on this topic. There may be reasons why dried drips or marks appear within an apartment or on the inside of a window assembly that do not necessarily bespeak an inadequacy in the window assembly itself.

Second, the dried water drips or marks must have been apparent to, and taken into account by, Messrs Karsai, Hunton and Joannides when they made their assessment leading to Exhibit K. And yet this was not referred to in their evidence as a definitive indication of water ingress.

Third, there is one example (apartment 2006) where Mr Moisidis stated in his affidavit that he had seen “dried water drip marks” at the head of the curtain wall in the lounge room and main bedroom. However, although Mr Moisidis’s contemporaneous note of his inspection of that apartment referred to “evidence of previous leaks” at those locations, it also recorded that “Occupant advised NEVER HAD LEAKS” (emphasis in original). Mr Moisidis did not mention the latter observation in his affidavit. The language and emphasis of Mr Moisidis’s note suggests that the occupant of apartment 2606 had not merely said that the window units were not currently leaking, but had emphasised that they had “never” leaked.

Mr Moisidis inspected apartment 2006 on 26 August 2014. The occupant may very well still live there. The Owners Corporation did not call that person to explain the comment that Mr Moisidis recorded. I conclude from this that the dried water drip marks in this apartment were not caused by water leaking through the window assemblies. That leads me to conclude that, absent other signs of water ingress, the mere presence of dried water marks is an unsafe basis on which to infer actual water ingress.

The window units which require consideration in these circumstances are those in the apartments I have set out in the schedule attached to these reasons (Schedule Attachment (27.4 KB, pdf)).

I have identified those apartments by number, as well as by reference to the appropriate categories of window units as set out at [218] above, being:

I have also set out in that schedule my conclusion as to whether those window units should now be treated as “Schedule 1” apartments, and thus repaired.

My conclusion is that there should be added to the Schedule 1 Assemblies those window assemblies where water ingress was observed by Messrs Gwdoz or Moisidis in the following apartments:

I invite the parties to confer and agree as to the precise window assemblies involved.

The Hyder Specification as incorporated into the Contract (but not the Sub-Contract: see [155] above) required that, as part of the process of verification of the work done to install the facade, Brookfield either:

Brookfield accepts that it did neither of these things.

The question that arises is whether any relevant consequence flows from this failure, and whether the present performance of the facade is such that a breach of Brookfield’s and James’s contractual or other obligations has been established.

Had Brookfield conducted the prototype testing called for by the Hyder Specification (or engaged an independent testing laboratory to do so), and the prototypes passed those tests, that would hardly be an answer to the Owners Corporation’s complaint that some window assemblies are now leaking. Had the prototypes failed, that may have caused Brookfield or James to investigate and endeavour to rectify whatever it was about the prototypes that caused such failure. But that could not be an answer to whatever problems now exist as are causing water ingress.

Thus, as Mr Miller put it:

Nonetheless, a considerable amount of Court time during the concurrent evidence of Messrs Karsai, Womack, Hunton and Lalas was directed to an examination of successful AS 4284 prototype tests that James conducted on window assemblies in other, earlier, developments, including at the Merchant Court Hotel. Brookfield and James contended that those window assemblies were indistinguishable from those installed at Beau Monde, and that (to adopt Mr Miller’s words):

In one of his reports, Mr Lalas, in great detail, pointed to what he contended to be distinguishing features between the window assemblies at Beau Monde and those that had passed the earlier James prototype tests. Hours were spent in concurrent evidence on this subject.

However, ultimately, Mr Lalas gave this evidence in response to questions from Mr Ashhurst:

Thus, ultimately, Mr Lalas accepted that such differences as may exist between the James prototypes and the window assemblies at Beau Monde were relevantly immaterial.

That suggests, as Mr Miller submitted, and if it matters, that as the earlier James prototype window assemblies passed AS 4284 testing, it is likely that those installed at Beau Monde would also have passed AS 4284 testing, and thus satisfied the requirements of the Hyder Specification.

Mr Lalas tested the window units in four apartments (2506, 2507, 2606 and 2607) using the test prescribed in AS 4284 (the Sirowet test). He also tested some 40 other window units using a modified form of the testing prescribed in AAMA 501.2.

AS 4284 testing is a water penetration test where nominated water flows are sprayed continuously over the test sample at 0.05 metres per second per square metre of external sample area at certain pressures.

To effect these tests, Mr Lalas organised the construction of test chambers, which were attached to the side of the building adjacent to the apartments in question. Water was then applied, under pressure, from the test chamber to the window units.

AAMA 501.2 calls for the application of water under pressure to the external face of the facade elements. Mr Lalas said that he modified the procedure by “adding a suction chamber…to provide a pressure difference across the facade which is applied in service by the wind” and by utilising “water line pressure in the hose…to reduce the effect of the water spray”. I understood Mr Lalas to have made these modifications to replicate, to some extent, weather conditions to which the facade was likely to be subject.

The Owners Corporation submitted that it was appropriate for Mr Lalas to conduct the AS 4284 and modified AAMA 501.2 tests because it was “reasonable and appropriate to assume” that the facade “should still meet the performance requirements” set out in cl 3 of the Hyder Specification “when that facade is only 8 years old, 17 years from its first major maintenance (at 25 years) and only 8 years into its total design life of 50 years as prescribed by” the Hyder Specification.

But that submission assumes the correctness of the Owners Corporation’s reading of the Hyder Specification, namely that cl 3 prescribes the “performance requirements” of the facade.

For the reasons I have set out above, I do not agree. My opinion is that cl 3 of the Hyder Specification is directed to the manner in which the facade is to be designed, and calls for the design of the facade system to meet the performance parameters set out (including weather tightness when tested under AS 4284).

The Owners Corporation did not identify any aspects of the design of the window assemblies installed at Beau Monde that were inadequate. In particular, the Owners Corporation did not identify any aspect of the design of the window elements that did not comply with the requirements of the Hyder Specification.

As Mr Ashhurst noted, Mr Corsaro made no reference to any inadequacy in the design of the facade in his opening submissions.

In closing written submissions, the Owners Corporation stated that:

But it was not for Brookfield to show that the facade design complied with the Hyder Specification. It was for the Owners Corporation to show that it did not.

The Owners Corporation also submitted (without elaboration) that:

Insofar as this submission was based on the debate arising from Brookfield’s failure to conduct the prototype tests called for by the Hyder Specification, for the reasons I have set out above, I am not satisfied that the facade elements installed at Beau Monde would have failed prototype testing. On the contrary, I think it likely they would have passed.

Insofar as this submission is based on “observations”, I take this to be a reference to the observations of Messrs Joannides, Gwodz and Moisidis. My conclusion from those observations is summarised in the schedule to these reasons and described above. The schedule shows that, in the apartments identified, the facade was constructed or installed otherwise than in a proper and workmanlike manner and in accordance with the plans and specifications set out in the Contract. So much is accepted by Brookfield (albeit only in respect of the window assemblies originally in schedule 1 to Exhibit K). It does not show that the design of the facade was inadequate or not in compliance with the Hyder Specification.

Insofar as this submission is based on “expert opinion”, my attention was not drawn to any opinion expressed by Mr Lalas concerning the design of the facade or the failure of that design to comply with the Hyder Specification.

That suggests that there was no design problem with the window assemblies, and that the water ingress problems that have occurred are the consequence of inadequate installation or construction by Brookfield, rather than inadequate design by Brookfield or James.

The Owners Corporation also submitted that AS 4284 testing served the further purpose of “establishing the performance rating” of the facade (said to be necessary because Brookfield undertook no prototype testing) and “to the extent that leaks were revealed during that testing, [allowing] for investigation into the causes and sources of those leaks”.

I fail to see that it is necessary for Mr Lalas to establish a “performance rating” for the facade.

In any event, if this was what Mr Lalas was seeking to do, he seems not to have heeded the warning in AAMA 511.08 (see [179] above) that:

Mr Lalas spoke somewhat dismissively of the AAMA standards generally, describing them in one of his reports as being “guidelines” which “benefit its members”. In cross-examination, Mr Lalas said that “these people” (that is, the AAMA) “are pushing their own…barrow” and “telling their association members that that’s the right one to use”.

However, AAMA 501.2 is referred to in the Hyder Specification (see [156] and [186] above). Further, despite his evident misgivings about the AAMA, Mr Lalas conducted tests using a modified form of the testing recommended in AAMA 501.2.

I also cannot see how subjecting the facade to AS 4284 testing would cast any light on the “causes and sources” of leaks, unless such testing was confined to window assemblies in apartments that had been shown to leak. They were not.

Mr Lalas’s AS 4284 tests were conducted in only two locations, and in relation to the window units in four apartments: 2506, 2507, 2606 and 2607. This was evidently because of the expense to the Owners Corporation and the inconvenience to the residents of the apartments of such tests.

Of those four apartments, two (2506 and 2606) were not in the form originally constructed by Brookfield. A third party, Remedial Building Services Australia Pty Ltd, effected repairs to the window units in those apartments in 2012. Mr Lalas was not aware of this when he conducted his AS 4284 testing. That fact alone causes me to be cautious about Mr Lalas’s conclusions.

Further, two of the apartments (2506 and 2507) had not, at the time of Mr Lalas’s tests, been identified by any of Mr Joannides, Mr Karsai or Mr Hunton as having leaked. Mr Moisidis did see a pool of water in apartment 2506 in August 2014; hence I have added that apartment to the Schedule 1 Assemblies (see [272] above). But the remaining apartment, 2507, has never been the subject of a report of leaking.

The window assemblies in all four apartments failed the AS 4284 test. But one of the four apartments that leaked during Mr Lalas’s AS 4284 testing has never leaked in natural conditions – not even during the October 2014 and April 2015 storm events.

Mr Hunton and Mr Karsai both gave evidence that AS 4284 testing eight or nine years after construction of the facade will not to demonstrate whether the design of the facade system and the window assemblies tested would have passed the test when newly constructed. Each of the experts (including Mr Lalas) agreed that the joints of the various facade elements are subject to movement, the rain shield subject to ultraviolet degradation, some window handles broken and gaskets compressed, and some window units subject to the installation of blinds or lack of maintenance by owners. Each of these factors could also affect weather tightness.

The warranty in the Hyder Specification did not call for the facade to withstand AS 4284 testing; it called for it to be weather tight. As I have said, whether the facade is weather tight is to be determined by whether it lets the weather in: does it leak in natural weather conditions?

As to Mr Lalas’s modified AAMA 501.2 tests, the Owners Corporation submitted:

But Mr Lalas did not state in his report that this was why he conducted the modified AAMA 501.2 tests. Rather, he said that the tests were “diagnostic tests only”; that is (as I understood Mr Lalas), tests designed to ascertain to what extent the facade would allow water ingress under natural conditions (hence Mr Lalas’s modifications to the test to take account of wind and water pressure).

I see a number of problems associated with Mr Lalas’s AAMA 501.2 testing.

The first is that, as I have set out at [171] above, AAMA 501.2 states that:

Yet this appears to be precisely how Mr Lalas sought to use his AAMA 501.2 tests, albeit in a modified form.

Second, AAMA 501.2 states that AAMA 511 (that is, not AAMA 501.2) “is the proper test method for forensic water penetration testing of fenestration products” (see [171] above).

Third, AAMA 501.2 states that it is not an appropriate “field check method” for testing “operable components such as operable windows and doors”. Although Mr Lalas stated that he focussed some aspects of his AAMA 501.2 testing on fixed windows, his testing also involved testing operable windows and doors.

Fourth, as I have mentioned, Mr Lalas tested window assemblies which had not hitherto leaked. He thus seems not to have heeded the warning in AAMA 511.08 (see [176] above) that:

But Mr Lalas did not confine his “diagnostic testing” to “water leaks that are known to occur”.

Mr Lalas conducted his AAMA 501.2 testing on 38 window assemblies in 36 apartments. All failed. And yet, notwithstanding the observations of Mr Moisidis and Mr Gwodz during the October 2014 storm event, 12 of the window assemblies which failed Mr Lalas’s modified AAMA 501.2 test (almost one third of those tested) have never been reported as having leaked (two assemblies in apartments 1007, 2106 and 3501 and one assembly in each of apartments 1410, 1411, 1710, 2007, 2102, and 2507).

Fifth, Mr Lalas gave this evidence in response to questions from Mr Ashhurst:

That evidence suggests that Mr Lalas was seeking to do more than simply ascertain the sources and causes of reported leaks. He was seeking to establish whether there was a systemic problem across the whole facade, informed, I would infer, by his reading of the Hyder Specification and assuming that there was more water ingress than had been reported.

In those circumstances, I am not satisfied that the tests conducted by Mr Lalas add anything to the conclusions that can be drawn from my findings of actual, observed water leaks. In particular, Mr Lalas’s testing does not enable me to reach any conclusions as to whether window units that have not failed to date (that is, have not leaked) will do so in the future.

The Owners Corporation also relied upon evidence given by Dr Graeme Wood. Mr Wood is an expert in the field of wind engineering, wind driven rain and wind induced external pressures. His report was admitted without objection. He was not cross-examined.

The Owners Corporation contended that the effect of Dr Wood’s evidence was that:

Dr Wood’s evidence is uncontroversial. It is, however, of limited assistance in resolving the issues before me. Dr Wood’s analysis is based on data since 2013 (and says nothing about weather conditions between 2005 and 2012) of wind and rainfall records at Sydney Airport, which is said to be similar to that which would be obtained from Observatory Hill (none of which data is annexed or exhibited to Dr Wood’s report). The data is said to cast light on wind and rainfall pressures that would have been experienced at Beau Monde over two defined periods.

The facade experts (Messrs Hunton, Karsai, Womack and Lalas) agreed that the assessment of Dr Wood did not effect their reasoning or conclusions, even when their reasoning and conclusions diverged.

There is no suggestion that Dr Wood visited Beau Monde. Dr Wood does not seek to relate his theoretical calculation of average pressures across the facade faces over particular storm events with any analysis of leaks actually observed at Beau Monde.

Overall, I am not persuaded that Dr Wood’s analysis takes the Owners Corporation’s case any further.

Between September and November 2014, Mr Womack effected repairs to W10 window assemblies in studio apartments 1203, 1603, and 1609.

All of those assemblies were Schedule 1 Assemblies.

In his report, Mr Womack opined that:

Mr Womack identified the causes of water entry in these assemblies and concluded that, for the most part, they were caused by “poor workmanship” (but also, in some respects, by lack of maintenance).

During the concurrent evidence, and in final submissions, attention was focused on the repairs effected by Mr Womack to the W10 window assemblies in apartment 1203, presumably because these repairs were effected in November 2014 (that is, after the October 2014 storm event). At the time the repairs were effected, it was clear that there was significant water related damage in apartment 1203, including from the October 2014 storm event.

Mr Womack set out a proposed “rectification methodology” which involved some 23 steps.

During the concurrent evidence, Mr Womack summarised the work done as follows:

The testing and repair work at apartment 1203 took place on 5, 7, 10, 11, 12 and 17 November 2014. Mr Karsai was present during much of that time.

Mr Womack agreed, unsurprisingly, that before commencing rectification work he opened up the window assembly. Both Mr Womack and Mr Karsai agreed that “the back had been opened up and you could see the assembly” and that they had “all the advantages of seeing the assembly and seeing the water coming through”.

On 5 November 2014, Mr Womack conducted a water test in accordance with AAMA 511.

In that regard, Mr Karsai gave this evidence:

On 7 November 2014, Mr Womack caused various repairs to be made to the relevant window assemblies.

During concurrent evidence, Mr Karsai described that work as follows:

In answer to questions from Mr Corsaro, Mr Womack described the work done as follows:

Those repairs were effected over a number of days.

On 10 November 2014, the window assemblies were retested. Some water ingress occurred. Mr Womack said that the “total volume of water ingress was approximately half a cup to one cup”.

On 11 and 12 November 2014 further seals were installed.

A final test took place on 17 November 2014. It was successful.

It is clear that the repairs carried out by Mr Womack were effective to prevent further water leaks. Apartment 1203 suffered no water ingress during the April 2015 storm event. It also withstood testing conducted by Mr Lalas.

Thus, Mr Lalas gave this evidence during the concurrent evidence in response to questions from Mr Ashhurst:

In its reply closing submissions, the Owners Corporation emphasised that although Mr Womack and Mr Karsai had planned the best repair method to the relevant window assemblies after opening up the back of the assembly, the first attempt failed. The Owners Corporation also emphasised that the repairs (initially unsuccessful) involved sealing “every single junction at every single point of the window frame”.

The Owners Corporation submitted:

That submission misstates what occurred. Further seals were applied to the assemblies after the 10 November 2014 failure. After those further seals were installed, on 17 November 2014 the assemblies passed Mr Womack’s water tests.

It does appear that (again, unsurprisingly) a process of trial and error was undertaken. It was, however, ultimately successful. And although the repair on the W10 window assemblies in apartment 1203 took place over the period to which I have referred, evidence from a building contractor, SJA Construction Services Pty Ltd, suggests that rectification work adopting Mr Womack’s methodology could now be effected at a rate of two working days per level.

Mr Womack’s method of repair of the W10 window assemblies has been shown to be effective. In my opinion, it represents what is “reasonable” and “necessary” to compensate the Owners Corporation for Brookfield’s failure to exercise due care and skill concerning the installation of those assemblies.

In its reply closing submissions, the Owners Corporation set out “the Lalas method for the repair of the key window and curtain walls assemblies (in the repair context)”. That method was set out in an appendix to one of Mr Lalas’s reports (and repeated, without elaboration, in the Owners Corporation’s submissions). It related not only to the W10 window assemblies but also to other (and I assume all other) window units in the building. The Owners Corporation made no submission explaining why Mr Lalas’s proposed method was reasonable or necessary; it simply included in its submissions Mr Lalas’s contentions as to what was necessary.

In those circumstances, I am not persuaded that Mr Lalas’s method of rectification, at least so far as concerns W10 window assemblies, is superior to that advanced by Mr Womack.

Brookfield’s closing submissions referred to costings performed by quantity surveyors engaged by Brookfield and the Owners Corporation in respect of “Mr Womack’s scope of rectification” for window assemblies.

According to Brookfield’s submissions, for W10 window assemblies, the quantity surveyor for Brookfield, Mr David Madden, has estimated the cost to be $958.40 for each assembly. By contrast, the quantity surveyor for the Owners Corporation, Mr Colin Fox, estimated a cost of $1,112.09 per assembly.

Messrs Madden’s and Fox’s estimates for repair of the other window assemblies in accordance with Mr Womack’s “scope of rectification” are said to be $630.60 and $1,529 per assembly respectively.

I was not taken in oral submissions to that evidence, and the quantity surveyors did not give evidence before me.

Nor was I taken to Mr Womack’s “scope of works” for the window assemblies other than the W10 assemblies.

In its closing submissions, the Owners Corporation proposed that:

That has not occurred. I will invite submissions as to how this aspect of the matter is to be taken further.

The Owners Corporation has established “excessive”, “extensive” and “major” (to adopt the words used by Messrs Joannides, Hunton and Karsai) water ingress into each of the Schedule 1 Assemblies (as I have determined them to be; see schedule attached to these reasons (Schedule Attachment (27.4 KB, pdf))).

To that extent, the Owners Corporation has established that the building was not constructed in accordance with Brookfield’s contractual and statutory obligation to perform the work in a proper and workmanlike manner and in accordance with the plans and specifications of the Contract.

However, as I have said, the Owners Corporation did not identify any aspect of the design of the window assemblies installed at Beau Monde that was inadequate. In particular, the Owners Corporation did not identify any aspect of the design of the window elements that did not comply with the requirements of the Hyder Specification.

Nor, in my opinion, has the Owners Corporation established that the work done by Brookfield did not conform to the plans and specifications in the Contract. What it has established is that Brookfield performed some work (namely, installation of the Schedule 1 Assemblies) otherwise than in a proper and workmanlike manner and in accordance with the plans and specifications of the Contract.

The work suggested by Mr Womack has been shown to be effective to prevent water ingress in relation to W10 window assemblies. It is therefore probable that Mr Womack’s scope of works for the remaining window assemblies will be similarly effective. If that is so, remedial work as recommended by Mr Womack will be what is “necessary” and “reasonable” to remedy the building defects manifested by the water ingress through all of the Schedule 1 Assemblies. Replacement of the whole facade of the building would, in those circumstances, be “out of all proportion to the benefit” that would be thereby obtained by the Owners Corporation (Brewarrina Shire Council v Beckhaus citing South Parklands Hockey & Tennis Centre Inc v Brown Falconer Group; see [40] above).

I therefore see no analogy between the facts of this case and those in Building Insurers’ Guarantee Corporation v The Owners – Strata Plan No 57504 [2010] NSWCA 23 (upon which Mr Corsaro placed great emphasis). In that case, the work done was not in accordance with the plans and specifications of the relevant contract, which called for the installation of concrete or brick hobs to carry particular glazing. Instead, the builder used untreated pine. There was no evidence that the pine hobs had failed. Nonetheless, the Court of Appeal held that there was uncertainty as to the effectiveness of the hobs and a risk that they would fail. On this basis, the Court held that demolition and reinstatement (with concrete or brick hobs) was, on the evidence, the only way that the risk of water penetration could be eliminated (per Handley AJA, with whom Tobias and Campbell JJA agreed, at [83]).

This case is nothing like that. Brookfield has installed many window assemblies without due care and skill, and they have leaked. They must be rectified. But it has not been shown that Brookfield failed to do the work in accordance the plans and specifications of the Contract.

The Owners Corporation made a number of complaints with respect to mechanical services.

In this regard, the Owners Corporation adduced evidence from Mr George Floth. Brookfield adduced evidence from Mr Jarek Adamus. Mr Floth and Mr Adamus are both engineers.

Brookfield accepts that the Owners Corporation has established a claim for mechanical services in the sum of $69,636 comprising:

Three further issues require determination; access, heating and water meters.

The Contract included a mechanical services specification. Section 1.7 of that specification required that there be “easy access for operation, maintenance and removal of components” of mechanical services systems in the building.

Mr Floth contended that access to air-conditioning and heating units was, in some cases, inadequate.

In particular, Mr Floth contended that:

On the other hand, Mr Adamus contended that although access to air-conditioning componentry, particularly in the studio apartments, was tight, it was adequate.

The Owners Corporation made no specific allegation of inadequacy, by reference to any quantitative measurement, for any apartment. My attention was not drawn to any standard requiring any particular type of access to air-conditioning or heating components.

Nor did the Owners Corporation call evidence from any person (whether an occupier, owner or a tradesperson) that had had difficulty obtaining access using the panels provided, to the extent that any such access has been necessary for the 10 year period during which the Beau Monde apartments have been occupied.

I am therefore not able to discern any sound basis for this claim. As Brookfield contended, it appears to be based upon nothing more than Mr Floth’s personal sense of what he believed ought to have been provided.

The Owners Corporation contended that, in relation to apartments with two bedrooms, a shortcoming in the heating system has the result that the second bedroom in the apartment either does not heat up as quickly as other rooms, or does not heat up completely at all.

Mr Floth contended that the problem was caused by the fact that the heating coil in the relevant heating unit was too small and needed to be replaced with a larger heating coil or augmented with a second, smaller, coil.

Mr Floth and Mr Adamus agreed that the mechanical services specification in the Contract required that heating infrastructure be capable of maintaining a temperature in the apartments of 21 degrees, plus or minus 1 degree in winter.

Mr Floth contended that what was required was that the nominated temperature be achieved throughout the apartment. Mr Adamus contended that all that was required was that the relevant temperature be achieved at the system control point (being a wall mounted thermostat located in the living room).

My attention was not drawn to any provision in the Contract which touched on this question.

The Owners Corporation adduced no evidence of any complaint by any owner or occupier about this matter.

There was no quantitative evidence as to any measured temperatures, demonstrating significant temperature difference for any particular period in time in two-bedroom apartments.

The evidence established that there was a relevant difference in temperature between rooms (that is, a difference of greater than 1 degree) in only one apartment. The results for other apartments were variable.

In those circumstances, I am not satisfied that the Owners Corporation has established any breach of the Contract in respect of this issue.

This claim relates to what the parties refer to as a “tick tick” sound made by some chilled water meters, and associated with the air-conditioning system.

A claim earlier made by the Owners Corporation that the “noisy” meters contravened relevant acoustic standards was not pressed.

However, the Owners Corporation, through Mr Floth, did contend that, nonetheless, the meters installed were not adequate, as “particulates in the chilled water system” (designed to combat corrosion) caused some of the meters to make the “tick tick” sound.

On the other hand, Mr Adamus hypothesised that the sound was the result of a malfunction in one or both of the bypass valves designed to regulate water pressure in the system, rather than any problem with the meters themselves. Mr Floth accepted that one of the bypass valves had failed, and that maintenance issues may have contributed to water noise levels.

No particular water meter was identified as having been inspected or found to be corroded. Mr Floth relied upon second or third hand hearsay for his opinions, in particular conversations that he had with the contractor that removed certain water meters. My attention was not drawn to any evidence as to the number of water meters removed or where they were placed in the building. The alleged observations communicated by hearsay to Mr Floth were not the subject of any direct evidence in the proceedings.

The Owners Corporation made no claim for any work actually performed to replace water meters. None of the documents attached to Mr Floth’s reports concerning the works allegedly performed in this regard were tendered.

Nor did the Owners Corporation make any claim for costs incurred for works allegedly performed to replace water meters. No direct evidence has been adduced as to what work was performed, why, and what was found when the meters were removed.

Although the Owners Corporation alleged that the problem was systemic, it has not adduced evidence to make out this proposition.

In these circumstances, I am not satisfied that the Owners Corporation has established the entitlement to any relief in respect of the water meters.

The Owners Corporation alleges that bathroom and ensuite waterproofing and tiling in various apartments at Beau Monde are defective.

Brookfield accepts that the plaintiff has established a claim in the sum of $29,428.18 comprising:

The relevant standards are the Building Code of Australia 1996 up to and including amendment 11 (“the BCA”) and AS 3740-1994.

I heard expert evidence from Mr Colin Cass, retained by the Owners Corporation, and Mr Steven Abbott, retained by Brookfield. Mr Cass is an expert in the field of tiling and waterproofing. Mr Abbott is a building consultant.

Brookfield originally retained Mr Barry Schafer as its expert. Mr Schafer was not able to give evidence because of illness. For that reason, Brookfield was obliged, at short notice and shortly before the commencement of the proceedings, to retain Mr Abbott.

Although the evidence on this topic ranged wider, the Owners Corporation’s final submissions were confined to five topics: defective construction of water stop angles, rusting door jambs, damage to concealed spaces, damage to adjoining rooms and grout discolouration.

I shall deal with each in turn.

The showers at Beau Monde were fitted with shower screens. Part of the system to contain water within the shower area is a floor angle, which the parties described as a “water stop angle”.

AS 3740-1994 defines “floor angle” as “an angle bonded to the floor to form the perimeter of a hobless shower. The finished floor falls from this angle to the shower waste”.

Mr Cass said that a floor angle is necessary to stop the water that inevitably enters into the mortar screed under the shower tiling from escaping from the “category one” area (that is, the shower itself) into the “category two” area (the area of the bathroom beyond the shower).

At the time of installation, AS 3740-1994 required that the water stop angle be flush with the surface of the floor tile.

It was common ground that there are some instances at Beau Monde where the water stop angle has been installed too low (that is, below the top finished area of the floor tiles), thus allowing shower water to escape from the shower enclosure (the category one area) into the tiled screed in the category two area.

However, Mr Cass and Mr Abbott agreed that even if the water stop angles had been installed in compliance with the relevant standard (i.e. flush with the surface of the shower floor tiles), shower water may still be able to escape from the shower to the surrounding area.

Mr Cass and Mr Abbott agreed that AS 3740-1994, as it then was, was deficient, and that construction in accordance with it might still allow water egress to occur.

I was informed that the relevant standard has since been altered to require that water stop angles sit proud of the shower tiles. Thus, any reconstruction of this aspect of the showers would have to comply with the current standard, and incorporate a water stop angle sitting proud of the tiles.

Mr Cass gave evidence that he had observed 10 dismantled bathrooms at Beau Monde, and that in 8 of those 10 bathrooms the water stop angle had been installed so as to be below tile level.

It was common ground that in bathrooms which had not been demolished, it was not possible to observe whether the water stop angles had been installed proud of the tiles, flush with the tiles or below tile level (because that area is obscured by the bottom track of the shower screen).

Mr Cass expressed the opinion that because he had seen low water stop angles in 8 of the 10 bathrooms he was able to inspect, it was likely that there was a similar construction error elsewhere. Thus, Mr Cass opined that 80 per cent of the remaining bathrooms may be affected by such error.

I do not see how Mr Cass’s conclusion as to the remaining bathrooms necessarily follows from his observations of the 10 dismantled bathrooms. Nor does it seem to me to follow that water ingress to the category two areas of those bathrooms would have been prevented had the water stop angles been installed in accordance with the then requirements; that is, flush with the shower tiles. As I have said, Mr Cass and Mr Abbott agreed that the then prevailing standard was deficient, and that this was why current standards require that the water stop angle sit proud of the shower tiles.

Mr Cass’s conclusions as to the allegedly systemic nature of the problem involving water stop angles was based upon moisture readings that he took using a moisture meter, known as a protimeter. Mr Cass said he took moisture meter readings in 167 bathrooms and found that the protimeter showed a “high” or “medium” reading in 125 (or some 75 per cent) of those bathrooms.

Mr Cass agreed that he had assumed there to be a direct correlation between his moisture meter readings and the presence of moisture in the relevant parts of the bathrooms.

Mr Abbott criticised Mr Cass’s use of the protimeter to achieve “high”, “medium” and “low” ranges. Ultimately, the Owners Corporation did not dispute that the protimeter, when used in the mode adopted by Mr Cass (the “search” mode), did not record precise measurements of moisture levels. Mr Cass agreed that the protimeter was no more than an “indicative tool”.

Mr Cass summarised his proposed rectification method for the water stop angle issue as follows:

As Brookfield pointed out, the rectification method proposed by Mr Cass involved betterment. Mr Cass proposed to rectify the water stop angles using an inverted U channel at an angle over the finished floor tiles (which was not the method required by AS 3740-1994). He also proposed the complete replacement of all tiling in bathrooms, due to the difficulties in obtaining matching tiles for those that actually need to be replaced. The actual number of tiles that need to be replaced as part of Mr Cass’s method is a small part of the whole bathroom area and the shower screen. However, due to the aesthetics of matching tiles, the remedial scope of Mr Cass’s proposal becomes, in effect, the complete demolition and reconstruction of the entire bathroom.

I accept Brookfield’s submission that this remedial scope is unreasonable and unnecessary having regard to the hypothetical nature of the claim and the lack of any physical manifestation of excess of water caused by defective installation of the water stop angle in any apartment.

In all of these circumstances, I am not satisfied that the Owners Corporation has established any breach of the statutory warranties concerning water stop angles beyond those which will already be compensated by Brookfield’s agreement to pay the sum of $320,870 in respect of urgent works, which includes urgent works in bathrooms.

The Owners Corporation submitted that “it was common ground that between one-fifth and one-quarter of bathroom and ensuite door jambs in Beau Monde are rusting”.

That submission misstates the evidence. What Mr Cass and Mr Abbott agreed was that:

Mr Cass said that he inspected 41 bathrooms where he observed rusting door frames. He said that in each of those rooms his protimeter moisture reading was “medium” or “high”.

Mr Cass reasoned that as he had found “89 instances of high or medium moisture readings at doorways”, and “41 instances of rusting door frames presenting currently”, this meant that about 45 per cent (i.e. 41/89 x 100) had medium or high moisture levels at the doorways. To use the words of Mr Cass, “if that extrapolated to the whole of the Premises, 45 per cent of all bathrooms will have rusting door frames now, (about 140 in all) and more door frames that are embedded in wet mortar will follow”.

I do not accept this process of reasoning.

It assumes that because Mr Cass’s protimeter detected what he described as medium or high moisture levels in each of the bathrooms in which rust was observed, the rust was somehow caused by such moisture levels, which bespoke a systemic problem throughout the building.

Mr Cass said he believed that the rusting was caused by the presence of water in the floor screed which, in turn, was a result of water escaping from the category one area (the shower itself) to category two areas.

On the other hand, Mr Abbott opined that although rust could be caused by the presence of water in the screed, it could also be caused by other matters such as damage to the paint system or protective coating, or the use of cleaning products by occupants that have accumulated in the recesses around the base of the door jambs.

I am not able to conclude that Mr Cass’s opinion should be preferred to that of Mr Abbott. Therefore, I am not prepared to conclude that such rusting as has been observed is the result of any defective construction of the bathrooms.

There is evidence that there has been damage to concealed spaces under vanities and baths. However, Mr Cass and Mr Abbott disagreed as to the extent of that damage.

Mr Cass gave evidence that the waterproofing of the bathrooms was completed before installation of the vanities and baths, and that there are no water stops installed at the threshold of the vanities. As a result, Mr Cass opined that moisture would be able to travel into those areas unimpaired by membrane or water stops.

Mr Cass said that the only investigative method that would provide total certainty as to the location and extent of damage to concealed spaces was destructive testing; that is, removal of tiles and lining boards with the costs and dislocation that would result.

Brookfield submitted, and the Owners Corporation did not dispute, that the evidence as to actual observation of water in concealed spaces was confined to a total of nine vanities in six bathrooms.

Mr Cass hypothesised that in fact there was concealed area damage in 45 per cent of all bathrooms in Beau Monde on the following basis:

This reasoning contains a number of assumptions.

The first is that the protimeter was a reliable guide to reach the conclusion set out at [440(a)] above, namely that there was a “medium” or “high” moisture level present in 125 bathrooms.

As I have mentioned, Mr Cass agreed that the protimeter was an “indicative tool” and not a precise means to measure moisture.

I had this exchange with Mr Cass during the concurrent evidence:

Second, Mr Cass’s reasoning assumes that there was a direct correlation between his protimeter moisture readings and the presence of significant moisture in the vanities, and some sort of correlation between his protimeter moisture readings and the result of the borescope investigations of 15 vanities.

In that regard, this exchange occurred between Mr Cass and Mr Ashhurst during concurrent evidence:

The problem identified with the vanities was that the kickboards had become swollen and would rot if in constant contact with water in concealed spaces, and thus need to be replaced.

In so far as the observational evidence has established that water penetrated the vanities and caused the kickboards to become swollen, Mr Cass’s evidence as to the absence of water stops leads me to conclude that Brookfield is liable to rectify the defect.

It is common ground that rectification would require the removal and replacement of any swollen kickboards.

Brookfield accepts that, based on the observational evidence, some nine vanities require rectification at an estimated cost of between $320 and $340 per vanity (being the figure referred to at [402] above).

I am not prepared to find, based on what I regard as Mr Cass’s thought reasoning, that any systemic problem has been established such as would warrant Brookfield paying any further amount.

Mr Cass and Mr Abbott agreed that some rooms adjoining bathrooms at Beau Monde have water damage.

Fifteen apartments have been identified. All but two have been repaired.

Brookfield has accepted, on a without admission basis, that an award should be made to the Owners Corporation for the costs of rectifying the remaining two bathrooms using the method agreed to and recorded at Exhibit 27 (item 5). I understand that this is the amount of $16,798.18 referred to at [402] above.

Mr Cass and Mr Abbott agreed that there is grout discolouration in some bathrooms, but that it is not possible to quantify precisely the number of bathrooms where this occurs.

Mr Cass said that 107 of the 167 bathrooms he inspected had a “medium” or “high” moisture reading or exhibited grout discolouration (or “efflorescence”).

Mr Cass said that the grout discolouration is likely caused by moisture regularly escaping from the shower enclosure due to faulty stop angles.

However, the experts agreed that grout discolouration could also be caused by cleaning chemicals, lack of maintenance, water falling onto tiles as a result of ingress or egress to the shower, or some other cause.

Mr Cass gave this evidence in response to questions from Mr Ashhurst:

Based on this evidence, I am not able to conclude that the grout staining or efflorescence was caused by any defect in the construction of the building, as opposed to the manner in which the particular bathrooms have been maintained.

In those circumstances, I am not prepared to make any order about this aspect of the matter.

In accordance with cl 145(1)(b) of the Environmental Planning and Assessment Regulation 2000 (NSW), the Beau Monde building was required to comply with the relevant requirements of the BCA as in force at the time the application for the construction certificate was made. BCA compliance can be achieved through “deemed-to-satisfy provisions” or through “alternative solutions” (or a combination of both), provided that the relevant performance requirements are satisfied. If a development does not satisfy the deemed-to-satisfy provisions in any respect, an alternative solution must be developed to address the relevant non-compliance.

Although the Owners Corporation originally claimed some $2.235 million for fire service defects, the amount of its claim as pressed at the hearing was $80,525. The ambit of the dispute was narrowed, I was informed, following expert conclave and associated discussions between the Owners Corporation’s fire expert, Mr Greg Murrow, and Brookfield’s fire expert, Mr Stephen Grubits.

There was, to some extent, an air of unreality about this aspect of the Owners Corporation’s claim.

The Beau Monde building received an occupation certificate nine years ago. It has not received any adverse works orders by the NSW Fire Brigade or local council in the time since the occupation certificate was granted.

Further, on 15 March 2005, the NSW Fire Brigade wrote to North Sydney Council stating that it had conducted an inspection of the premises on 15 March 2005. It concluded:

The parties produced a schedule setting out the competing contentions of Mr Murrow and Mr Grubits in relation to the items which remained in dispute.

The parties prepared their final submissions in terms of the item numbers in that schedule. I shall do the same.

There were 14 defects which Brookfield’s expert, Mr Grubits, accepted existed, but in respect of which Brookfield did not accept responsibility.

The evidence before me in relation to these items involved little more than Mr Murrow and Mr Grubits expressing an opinion, based upon their inspection of the items in question, as to whether the problems had been caused by Brookfield during construction or resulted from a lack of maintenance or the like since construction.

The items in question were 3, 5, 13, 17, 39, 42, 296 to 299, 301, 303, 304, 309 and 314.

Items 3, 5, 13, 17 and 42 related to notices or signs which were either missing or inadequate, and to a missing handle on the door of a hydrant booster assembly. It seems to me very likely that these shortcomings are a result of lack of maintenance over the years since construction in 2005, rather than any shortcoming in construction. I am not prepared to conclude these matters are Brookfield’s responsibility.

Item 39 related to an incomplete concrete services shaft wall. Mr Murrow and Mr Grubits offered different opinions, based upon the appearance of the exposure, as to whether it was an original building problem or the result of subsequent demolition. I see no basis upon which to prefer Mr Murrow’s view to Mr Grubits’s. I am therefore not able to form any view about this matter and am not satisfied that the plaintiff has established that it was a defect in the original construction rather than in later renovations.

Items 296 to 299, 301, 303 and 304 relate to defects within one apartment, apartment 3501. The defects relate to missing fire collars or other fire stopping devices. Mr Murrow and Mr Grubits expressed differing views, based upon the current appearance of the items in question, as to whether they represented a defect in original construction rather than a problem that occurred during a later renovation.

I am persuaded by Mr Murrow’s evidence that items 298 and 299 appear a lot more likely to be original defects, rather than defects caused by later renovation. Item 298 involves three copper pipes which appear to have been at all times lagged over their entire length, and therefore not properly constructed. Item 299 relates to four copper pipes which appear not to have been properly “fire stopped” at the time of construction.

Otherwise, having considered each expert’s competing contentions, I am not able to say whether the remaining problems were the result of defective original construction rather than later renovation.

The remaining items, items 309 and 314, occurred in apartment 3502. These items also involved the absence of fire collars or fire stopping devices. Again, I am not able to say, based upon the competing contentions of the experts, whether these problems were ones arising from original construction or later renovation.

Accordingly, so far as concerns the partially disputed items, the Owners Corporation succeeds only in relation to items 298 and 299.

Clause E1.3(b)(iv) of the BCA requires that a “fixed on-site pump set” must have direct access to a road or an “open space”. An “open space” includes a fire stair.

Mr Murrow and Mr Grubits agreed that the hydrant relay pump room on level 17 does not have direct access to an “open space” (i.e. a fire stair). This is because it opens onto a public corridor, rather than directly onto a fire stair.

The matter which divided the experts was whether the hydrant relay pump on level 17 is a “fixed on-site pump set” for the purposes of the relevant part of the BCA.

Mr Grubits contended that the hydrant relay pump on level 17 was not a “fixed on-site pump set”, as it was a booster pump rather than a pump at ground level. The function of a relay pump is to boost pressure part way up the building so that there is sufficient pressure on the higher floors of the building. Mr Grubits stated that it can therefore never be located at ground level.

I am not able to determine from this that the relay pump is not a “fixed on-site pump set”.

In any event, both experts agree that the matter can be rectified by way of an alternate solution that involves adding two signs to the building at a cost of approximately $500. I propose to order that Brookfield attend to this.

BCA cl F4.5 requires that a room “occupied by a person for any purpose” must be ventilated.

Both the hydrant relay pump room on level 17 and the sprinkler valves room on level 8 are not ventilated.

The matter for consideration is whether rooms are “occupied by a person for any purpose”.

These two rooms are “occupied” from time to time, in the sense that people sometimes come and go from the room.

Mr Murrow drew attention to a publication called “Glossary of Building Terms”, which states that “occupied space” is “any space within a building in which a person will be present from time to time during the intended use of the building”.

Although Mr Murrow said that this document was an industry recognised document for definitions not incorporated in the BCA, he did not draw attention to any authority or regulation to that effect.

However, it appears to me to be likely that the intention of the relevant clause of the BCA was to provide that there be ventilation in a room in which someone might be present, otherwise than fleetingly, to carry out work or to perform inspections. It also seems likely that occasions might arise when trades people or inspectors would need to be present in both the hydrant relay pump room and the sprinkler valves room for either of these reasons, and that those rooms would be “occupied” during such activity.

Accordingly, my conclusion is that both these rooms should be ventilated. The Owners Corporation contends that the cost of installing such ventilation would be $5,000 for the hydrant pump room and $1,750 for the sprinkler valves room, although my attention has not yet been drawn to any evidence in support of that proposition.

Clause D1.2(f) of the BCA requires pump rooms to have two exits. It is common ground that the level 37 pump room has only one exit.

Trevor R Howse & Associates Pty Ltd have produced two alternative solution reports in relation to the level 37 pump room. It is common ground that the requirements of the second of those reports are met, but the requirements of the first report are not.

The Owners Corporation contends that there is no evidence that the second Howse report was ever recognised by any authority as sufficient compliance.

However, an occupation certificate has been issued for the property. There is no evidence of any works order made against the Owners Corporation in respect of the plant room. That suggests to me that the second Howse report has been recognised by the appropriate authority as sufficient compliance. Further, as Brookfield submits, the existence of the second Howse report establishes that if a works order ever was served on the Owners Corporation, an alternative solution such as the second Howse report would be considered adequate.

In those circumstances, I do not consider that the Owners Corporation has established any entitlement in respect of this item.

Clause D2.16 of the BCA requires that the bottom rail of balustrades in fire stairs be not more than 150mm above stair nosings.

Mr Murrow and Mr Grubits agreed that the balustrades on the west and east fire isolated exits from level 8 to the street do not comply with this requirement.

These fire stairs are in a part of the building which was in existence prior to the Contract. The area did not form part of any of the scope of works performed by Brookfield under the Contract.

Thus, it appears that Brookfield cannot be responsible for the current state of the balustrades. Mr Murrow was not able to say whether, during construction under the Contract, there was a requirement that the balustrades be upgraded.

I am not persuaded that Brookfield is responsible for this shortcoming.

There are no sprinklers in the level 37 lift motor room.

Clause E1.5 of the BCA requires that a lift motor room be fitted with a “sprinkler system” that complies with AS 2118. That standard requires that a lift motor room be fitted with a sprinkler unless the equipment in the motor room is “dry electrical equipment (non-oil filled)”.

The question is whether the Owners Corporation has shown that the lift motor in the level 37 lift motor room does not fall within this exception.

I understood it to be common ground that the lift motor is itself “dry electrical equipment”.

There is no direct evidence as to whether the lift motor is “non-oil filled” or not. Mr Murrow said that a lift mechanic told him that the lift motor had a gear box holding some 3L of oil and that an allied rope compressor contained 0.5L of oil.

The Owners Corporation adduced no expert evidence to say whether, assuming that what Mr Murrow was told was correct, the result would be that the lift motor was “non-oil filled” for the purposes of AS 2118.

I am not satisfied that the Owners Corporation has made out this aspect of its case.

Clause E2.2a requires that a mimic panel and manual call point “should be installed in a clearly visible and readily accessible location inside the main entrance area of the building”.

The mimic panel and manual call point at Beau Monde are installed at the entrance to the car park on Spring Street, which is at the rear of the building.

Mr Grubits contended that the Spring Street entrance might be regarded by the NSW Fire Brigade as being the “main entrance area” to the building.

I do not agree. It is obvious that the “main entrance area” to the building is the entrance facing Berry Street.

The mimic panel and manual call point must be relocated.

As I understand it, the parties are otherwise agreed as to all outstanding fire services work and what alternative solutions are required to ensure that Beau Monde is relevantly compliant.

Brookfield has conceded an obligation to compensate the Owners Corporation in the sum $38,554.31 in respect of general internal defects.

These defects comprise such matters as:

The Owners Corporation did not develop any detailed submissions in respect of these matters, which were summarised by Mr Joannides in his 3 April 2013 report.

Brookfield submitted that, in respect of the items identified by Mr Joannides:

In those circumstances, Brookfield submitted that the Owners Corporation had only established an entitlement to damages in respect of those 24 items (being the figure of $38,554.31 referred to above).

Brookfield submitted that there was no basis to conclude that any of the general internal building defects were systemic.

The Owners Corporation’s submissions did not engage with these details. It did not refer to this aspect of the matter in its reply closing submissions.

In those circumstances, I accept Brookfield’s position.

The plaintiff arranged for repairs to be effected to the facade and some bathrooms in 2012 and 2013, undertaken by Remedial Building Services Australia Pty Ltd. Mr Christopher Jakovljevic, a manager at Remedial Building Services, gave evidence before me.

The Owners Corporation did not address any submissions as to whether, and if so, to what extent Brookfield should pay for the cost of those urgent works.

However, in its submissions, Brookfield drew attention to the work that Mr Jakovljevic said that Remedial Building Services carried out, and the cost of that work. Brookfield stated that, without admission of liability, it was prepared to pay $320,870 (being the figure referred to at [12] above) assuming that the Owners Corporation is registered for GST, and $352,957 if it is not.

In those circumstances, I am not prepared to conclude that the Owners Corporation has any greater entitlement in respect of this aspect of the matter.

I invite the parties to confer and agree as to the consequences of my findings, and the steps that should now be taken to resolve issues not otherwise dealt with.