Self Represented Builder defeats Strata Scheme Defect Claim

Another NSW strata corporation losses most of it’s defect claim in the NSW District Court.

It’s bad enough that the strata corporation recovered less than 10% of its claim but, in this case, it took 7 days of hearing to get that result and the builder represented itself (making it all that worse).

So, what happened and why couldn’t all those committee members, experts, lawyers and barristers do better?  Here are the highlights of this sorry story.

The over 55’s strata corporation constructed at 317-321 Mona Vale Road, St Ives (called Woodbury) started life in difficult circumstances because the mortgagee for the developer took possession before things were completely finished, excluded the builder (VK Building Pty Ltd) from site, organised some completion works and sold the apartments to the first owners.

Not long after that defects started to appear in the buildings.  On top of that Ku-ring-gai Council issued orders against the strata corporation about non-compliant building work requiring it to make changes.  So the committee members began getting advice and raising things with the builder.  In fact, the builder came back a few times and did some work before things broke down.

Between January 2008 and March 2011 the strata corporation got 6 expert reports, formulated claims for 16 different items totalling $260,000 and started legal action claiming that amount from the builder on the basis of failures to comply with the statutory warranties implied by section 18B of the Home Building Act 1989 (NSW).

Although the strata corporation was represented by lawyers and a barrister, the builder said it could not afford lawyers so it’s director, Mr Karagavrilidis, represented it throughout the case.

After 7 days of hearing including arguments about the documents, evidence, cross-examination of many witnesses and experts and submissions by everyone, Judge Levy delivered a 48 page decision.

Sadly his decision meant that only 3 of the claimed items were approved in full, 6 claimed items were approved but for reduced amounts and 7 were refused.  The $260,000 claim was reduced to $21,500 (only 8%) plus interest of $2,000 and he sent the parties away to agree about costs with the comment that “as the defendant has been largely successful in defending the plaintiff’s claim considerations arise as to the appropriate order for costs”.

There were lots of reasons for the bad result including the following things –

·       post completion works by the mortgagee caused some of the defects,

·       the amounts claimed as expenses were really legal costs,

·       the strata corporation abandoned some claims during the hearing,

·       some defects resulted from a lack of maintenance after completion,

·       the experts did not establish why something things were defective,

·       the experts made assumptions that were not properly established,

·       the builder explained some things better than the experts,

·       some claims could not be linked to work done by the builder, and

·       some defects arose too long after the builder’s work.

Funnily enough the Ku-ring-gai Council order helped the strata corporation as it helped prove some of the defects.  So, this turned out to be a blessing in disguise.

A more detailed summary of the decision on each item is at the end of this commentary.  The case reference is Owners Corporation 77788 v. VK Buildings Pty Ltd [2011] NSWDC 91

12 August 2011 and, you can read the judgment here if you want to – http://www.caselaw.nsw.gov.au/action/PJUDG?jgmtid=153949

So, what can be learned from this case?

Firstly, that high quality expert evidence is essential (rather than just lots of it) and the experts need to properly explain things and deal with builder’s counter arguments.

Secondly, the claimed losses must be linked to the builder’s work (and the defects) and be supported by proper calculations.

Thirdly, always keep an eye on the economics of legal actions so costs are proportionate to potential results.

In this sad case, the strata corporation must have spent a lot of money to prepare and run a 7-day case, only got 8% of what it wanted and may have to pay the builder’s costs.  And, all when it probably has real building defects that need fixing.

With outcomes like this it’s no wonder builders defend defect claims.

Surely, we can all do better than this?

Summary of Woodbury claims & outcomes

	Claim	Claimed	Outcome	Result
1.	Relocation of the garbage room to comply with the development application	$5764	Approved in full	$5764
2.	Rectify common stairs to comply with the Building Code of Australia	$2530	Reduced – Repairs overstated	$1441
3.	Completion of intercom installation of an intercom security system	$4151	Denied – Due to mortgagee installing security gate	$0
4.	Repairs to gutters, flashings and downpipes	$1710	Denied – Due to post completion damage	$0
5.	Pre-litigation consultant inspections & reports	$3916	Denied – Should be legal costs	$0
6.	Pre-litigation legal, insurance and complaints expenses	$1000	Denied – Should be legal costs	$0
7.	Waterproofing & retiling Unit 4 courtyard	$17400	Reduced – Most defects not established	$2500
8.	Waterproofing & retiling Unit 5 courtyard	$32770	Reduced – Most defects not established	$2500
9.	Waterproofing & retiling Unit 8 courtyard	$44600	Reduced – Most defects not established	$2500
10.	Repairs to garage roof slab cracks to stop water penetration	$55000	Denied – Defects not established	$0
11.	Repair guttering	$2316	Reduced – Defects not fully established	$300
12.	Install fire collars to slab penetrations	$3603	Approved in full	$0
13.	Repair cracked driveway retaining wall	$55000	Denied – Defects not established	$3603
14.	Repair the garage retaining wall	$6500	Denied – Defects not established	$0
15.	Repair unfinished brickwork	$894	Approved in full	$894
16.	Tender & work supervision expenses	$8140	Reduced – Expenses overstated	$2000

Francesco …