What every owners corporation needs to know right now.

A recent Supreme Court decision has changed the landscape for owners corporations pursuing strata building bond money.

Here’s what happened, what it means for you, and why getting the right advice early is more important than ever.

First, a quick refresher: What is a strata building bond?

When a developer builds a residential strata scheme worth more than $20,000 in contract price, they are required by law to lodge a building bond with NSW Fair Trading. This bond typically 2% (increases to 3% 1 July 2026) of the contract price acts as a financial safety net for the owners corporation if building defects are found but not fixed.

The process broadly works like this:

• An independent building inspector completes an interim and then a final report identifying any defects.
• If defects remain unrectified, NSW Fair Trading can order the bond (or part of it) to be paid out to the owners corporation to fund repairs.
• The developer can dispute this decision via an internal review, and ultimately through the courts.

What happened in this case?

In May 2026, the NSW Supreme Court handed down a significant decision: Peninsula Point Frederick Pty Ltd v Secretary, Department of Customer Service [2026] NSWSC 476.

Here’s the short version:

• A developer at Point Frederick, NSW, lodged a building bond of just under $800,000.
• Defects were identified in interim and final inspection reports, with a quantity surveyor estimating rectification costs of over $1.3 million, well above the bond amount.
• The Secretary determined the full bond should be released to the owners corporation.
• The developer challenged the decision, submitting its own expert evidence and arguing the government reviewer hadn’t properly engaged with competing reports.
• The Court ultimately quashed the review decision and sent it back for redetermination — not because the owners corporation had done anything wrong, but because the reviewer failed to properly consider the developer’s submissions about methodology.

In summary, the owners corporation was on the verge of receiving nearly $800,000 to fix genuine building defects. Because of a procedural flaw in how the government reviewer handled the developer’s submissions, the whole process had to start over. No money. More waiting. More uncertainty.

What this means for your owners corporation.

This case is a wake-up call. It demonstrates three areas about the building bond regime that every owners corporation should understand:

• You may not even know the developer is fighting you.
  A developer can lodge an internal review application and pursue the matter all the way to the Supreme Court without the owners corporation being formally served or having any real opportunity to put its case forward. You can be completely in the dark while the process that affects your building’s future plays out.
• The bond process is deliberately provisional.
  The Court confirmed that the Secretary’s role is not to make binding legal findings about whether defects exist or who is to blame. The bond regime is designed as a rough-and-ready safety net, not a final determination. That means the money can be paid out, and then potentially clawed back, without ever resolving the underlying dispute about the building.
• Once you receive bond funds, your obligations are strict.
  Under the Strata Schemes Management Act, owners corporations must apply bond money strictly in accordance with the legislation. If the decision to release the bond is later set aside on appeal or remitter, there are real questions about what happens next including whether funds already spent need to be repaid or accounted for.

The parallel proceedings problem

Many owners corporations dealing with defects are pursuing claims under both the building bond regime and the Home Building Act 1989. These two pathways don’t always run smoothly side by side.

Decisions made in one forum can affect your position in the other. Accepting bond money (or not) can have strategic implications for your HBA claim. Engaging in one process without considering the other can inadvertently limit your options.

This is exactly the kind of complexity that requires experienced legal guidance a lawyer who understands how these regimes interact.

Our advice: Don’t wait until there’s a problem.

If you have received any notice from the Secretary under the building bond regime or if you’re aware that a building bond has been lodged for your strata scheme speak to a specialist strata lawyer now.

The timeframes in the legislation are strict, the stakes are high, and the window to protect your position can close quickly. 

For a detailed analysis of the Court’s decision, you can read our full case here: Strata Building Bonds Case:_What You Should Know

Strata Building Bonds: Complex Law, Clear Advice.

Strata living is about people’s homes, investments, and communities. Our team works with owners corporations, strata committees, and strata managers across Sydney metropolitan and regional NSW every day.

We can help you:

• Review any notices under the building bond regime and advise on your rights and obligations
• Monitor and intervene in review or judicial review proceedings to protect your interests
• Advise on how the bond regime interacts with any Home Building Act claims
• Guide your committee and manager on how bond funds must be applied and accounted for
• Represent you if the developer takes the matter to NCAT or the courts.

Our specialist strata legal team understands this area of law is complex. That’s why we ensure that our advice is clear, practical and focused on your outcomes.

FOR COMPLEX BUILDING BOND LEGAL ADVICE CLICK HERE NOW

Helen Amanatiadis I  LLB LLM  I  Lawyer

Helen has over 27 years’ experience in complex construction disputes. She is a Law Society of NSW Accredited Specialist in both Commercial Litigation and Building and Construction Law, a credential recognising peak expertise in her field. Profile l LinkedIn

Contact Us

For all strata law advice including by-laws, building defects and levy collections contact our specialist NSW and Sydney strata lawyers here or call 02 9562 1266, we’re happy to assist.

In a recent ruling, NCAT’s Appeal Panel has confirmed that a former lot owner is not entitled to sue an owners corporation for damages in NCAT. This ruling clarifies that former lot owners can only take legal action against an owners corporation to claim damages in a Court.  The ruling also has broader implications about the limits of NCAT’s jurisdiction to entertain claims made by former lot owners.

Background

There has been a surge in claims made by lot owners against owners corporations for damages. Those claims typically arise as a result of defects in the common property which allow water to leak into and cause damage to a lot. Typically, a lot owner sues the owners corporation for damages to claim compensation for financial losses they suffer as a result of the water ingress and damage, including loss of rent or alternate accommodation expenses where the lot becomes uninhabitable, costs to repair damage caused to the lot and other expenses such as legal costs and experts’ fees.

Jurisdiction

Those claims are brought by lot owners under section 106(5) of the Strata Schemes Management Act 2015 (Act) which gives them a statutory right to claim damages from an owners corporation for a breach of the duty to repair common property. NCAT has the power to award damages under section 232 of the Act on the application of an “interested person” including a lot owner.

The Case

In the recent ruling, NCAT’s Appeal Panel confirmed that a person who is a former lot owner at the time they take legal action against an owners corporation in NCAT claiming damages is not an “interested person” as a result of which the person does not have standing to sue the owners corporation in NCAT for damages.  The Appeal Panel confirmed that, where a lot owner suffers damages, for example, as a result of defects in the common property that allow water to leak into and cause damage to their lot, but the lot owner subsequently sells their lot, the former lot owner is only entitled to sue the owners corporation for damages in a Court, not NCAT.

Conclusion

This case clarifies that owners who sell their lots and then want to sue their owners corporation for damages must make that claim in a Court and not in NCAT. The case also has broader implications.  It likely means that, for example, an owners corporation cannot seek orders in NCAT against a former lot owner, for instance, orders to require a former lot owner to repair damage they cause to the common property by carrying out unauthorised renovations whilst they were a lot owner. The recent ruling provides important guidance on the limits of NCAT’s jurisdiction to determine claims between owners corporations and former lot owners.

Case: Griffinchuk No. 1 Pty Ltd atf Giffinchuk Family Trust v The Owners – Strata Plan No. 92745 [2025] NSWCATAP 273.

Adrian Mueller I BCOM LLB FACCAL I Partner

Since 2002 Adrian has specialised almost exclusively in the area of strata law. His knowledge of, and experience in strata law is second to none. He is the youngest person to have been admitted as a Fellow of the ACSL, the peak body for strata lawyers in Australia. Profile I Linked

Contact Us

For all strata law advice including by-laws, disputes, building defects and levy collections contact our specialist NSW and Sydney strata lawyers here or call 02 9562 1266, we’re happy to assist.

In a significant win for owners corporations, JS Mueller & Co Strata Lawyers recently secured a decisive landmark victory in the Court of Appeal, upholding a freezing order against a developer – Aqualand North Sydney Lavender Development Pty Ltd v The Owners – Strata Plan No. 102081 [2025] NSWCA 143

This groundbreaking decision, which prevents developers from dissipating assets, sets a new precedent and will have a substantial impact on the industry, ensuring funds are available to rectify building defects.

Below, you’ll find our article about the Supreme Court decision granting a freezing order against a developer at the request of an owners corporation. This decision was upheld by the Court of Appeal.

Introduction

The property development industry has become more astute in recent years.  This has resulted in property developers putting in place corporate structures that are intended to protect their assets.  This often results in owners corporations being unable to recover compensation from developers to cover the costs to fix defects that affect their buildings.  So what can be done to avoid that problem?

In this article we take a look at a recent case in which an owners corporation represented by JS Mueller & Co succeeded in convincing the Supreme Court to make a freezing order against a developer to prevent the developer dissipating its assets to ensure that the developer would have sufficient assets to pay any compensation the owners corporation was awarded by the Court to cover the cost to fix building defects.

The Facts

There is a mixed use building in Milsons Point, Sydney containing 125 residential lots and 2 commercial lots.  The building was completed in July 2021.  Since August 2021, the developer has been selling the residential lots in the ordinary course.  The developer has now sold 121 of the 125 residential lots.  The developer still owns 4 of the residential lots. They are effectively the developer’s only assets.

The building contains defects.  The owners corporation has sued the developer in the Supreme Court for damages arising out of those defects.  In the case, the owners corporation has obtained evidence from a quantity surveyor to the effect that the estimated cost to rectify the defects is in the order of $10.6 million.

The Problem

The owners corporation became concerned that the developer’s only assets were the four residential lots that it owned in the building and that once those lots were sold, the sale proceeds would be dissipated and the developer would have no assets left to pay any damages the owners corporation was awarded by the Court.  That would have rendered to the continuation of the court case against the developer pointless.

Application for Freezing Order

In November 2024 the owners corporation applied to the Supreme Court for a freezing order to be made against the developer.  The purpose of that order was to prevent the developer from disposing of its assets up to the value of $10.6 million being the amount of the owners corporation’s claim.  The developer resisted the application for the freezing order and argued that there was no basis for the Court to make that order.

The Decision

On 6 February 2025 the Supreme Court published its decision in which it concluded that it was appropriate for a freezing order to be made against the developer generally in the terms sought by the owners corporation.  The Court was persuaded that there was a danger that any damages that were awarded to the owners corporation would be wholly or partially unsatisfied because the developer might dispose of its assets once it sells the remaining 4 lots in the building that it still owns.  The Court concluded that it was likely that the developer would sell those 4 lots in the future and that it would distribute the profit generated by the sale of the those lots either by way of dividend or as a loan to other members of its corporate group.  This was consistent with the way in which the developer had dealt with the proceeds of sale of other lots it had sold in the development.

Conclusion

The case shows that an owners corporation that is concerned that a developer against whom it has made a claim for damages arising from building defects can take steps to protect its interests and ensure that the developer does not dissipate its assets to avoid having to pay damages to the owners corporation.  The case shows that the Supreme Court will make freezing orders against developers in appropriate circumstances to safeguard the position of owners corporations who are at risk of being left with nothing if the developers of their strata schemes are able to deal with their assets without restraint.

Case citation: The Owners – Strata Plan No. 102081 v Aqualand Constructions Pty Ltd [2025] NSWSC 31

NEED HELP WITH A BUILDING DEFECTS CASE?

Adrian Mueller I BCOM LLB FACCAL I Partner

Since 2002 Adrian has specialised almost exclusively in the area of strata law. His knowledge of, and experience in strata law is second to none. He is the youngest person to have been admitted as a Fellow of the ACSL, the peak body for strata lawyers in Australia. Profile I Linked

Contact Us

For all strata law advice including by-laws, building defects and levy collections contact our specialist NSW and Sydney strata lawyers here or call 02 9562 1266, we’re happy to assist.

This is a critical reminder that the NSW Building Commission’s 2025 Strata Defects Survey is closing on Wednesday, July 30, 2025. This is your direct opportunity to contribute to a comprehensive understanding of building defects in strata schemes across New South Wales.

Who Should Participate?

To participate in the defects survey you must:

1. be a strata scheme manager
2. have any class 2 residential apartment buildings built between 1 July 2018 and 30 June 2024
3. provide your feedback on the 2025 Strata Defects Survey by July 30, 2025

Why your Participation Matters in the Strata Defects Survey

By participating, you will contribute directly to a more robust and responsive regulatory building defects framework, ultimately benefiting the schemes you manage by:

• Influencing Policy: Your experience directly contributes to data that can shape better building standards.
• Highlighting Issues: Help shed light on common defects and the challenges owners face.
• Protecting Future Owners: Contribute to a safer and more reliable building environments for everyone.

More Information: Have Your Say

For more information on the 2025 Strata Defects Survey and to have your say before July 30, 2025 click here now!

Navigating Building Defects: Our Strata Lawyers Can Help

Building defect claims can be complex, time-consuming, and require a deep understanding of strata law. Identifying them is only the first step, effectively resolving them requires expert, specialist legal advice.

We are highly experienced and specialise in representing strata schemes and individual owners in building defect disputes. Our expertise in building defects includes:

• Comprehensive Legal Assessment: Advising on your scheme’s rights and available legal avenues.
• Strategic Negotiations: Representing your interests in discussions with builders, developers, and insurers.
• Dispute Resolution: Guiding you through mediation, NCAT proceedings, or court action to achieve a favourable outcome.
• Protecting Your Scheme’s Assets: Ensuring your building’s value and the safety of its residents are upheld.

CLICK HERE FOR HELP WITH BUILDING DEFECTS SPECIALIST LEGAL ADVICE

Adrian Mueller I BCOM LLB FACCAL I Partner

Since 2002 Adrian has specialised almost exclusively in the area of strata law. His knowledge of, and experience in strata law is second to none. He is the youngest person to have been admitted as a Fellow of the ACSL, the peak body for strata lawyers in Australia. Profile I Linked

Contact Us

For all strata law advice including by-laws, building defects and levy collections contact our specialist NSW and Sydney strata lawyers here or call 02 9562 1266, we’re happy to assist.

Introduction

The property development industry has become more astute in recent years.  This has resulted in property developers putting in place corporate structures that are intended to protect their assets.  This often results in owners corporations being unable to recover compensation from developers to cover the costs to fix defects that affect their buildings.  So what can be done to avoid that problem?

In this article we take a look at a recent case in which an owners corporation represented by JS Mueller & Co succeeded in convincing the Supreme Court to make a freezing order against a developer to prevent the developer dissipating its assets to ensure that the developer would have sufficient assets to pay any compensation the owners corporation was awarded by the Court to cover the cost to fix building defects.

The Facts

There is a mixed use building in Milsons Point, Sydney containing 125 residential lots and 2 commercial lots.  The building was completed in July 2021.  Since August 2021, the developer has been selling the residential lots in the ordinary course.  The developer has now sold 121 of the 125 residential lots.  The developer still owns 4 of the residential lots. They are effectively the developer’s only assets.

The building contains defects.  The owners corporation has sued the developer in the Supreme Court for damages arising out of those defects.  In the case, the owners corporation has obtained evidence from a quantity surveyor to the effect that the estimated cost to rectify the defects is in the order of $10.6 million.

The Problem

The owners corporation became concerned that the developer’s only assets were the four residential lots that it owned in the building and that once those lots were sold, the sale proceeds would be dissipated and the developer would have no assets left to pay any damages the owners corporation was awarded by the Court.  That would have rendered to the continuation of the court case against the developer pointless.

Application for Freezing Order

In November 2024 the owners corporation applied to the Supreme Court for a freezing order to be made against the developer.  The purpose of that order was to prevent the developer from disposing of its assets up to the value of $10.6 million being the amount of the owners corporation’s claim.  The developer resisted the application for the freezing order and argued that there was no basis for the Court to make that order.

The Decision

On 6 February 2025 the Supreme Court published its decision in which it concluded that it was appropriate for a freezing order to be made against the developer generally in the terms sought by the owners corporation.  The Court was persuaded that there was a danger that any damages that were awarded to the owners corporation would be wholly or partially unsatisfied because the developer might dispose of its assets once it sells the remaining 4 lots in the building that it still owns.  The Court concluded that it was likely that the developer would sell those 4 lots in the future and that it would distribute the profit generated by the sale of the those lots either by way of dividend or as a loan to other members of its corporate group.  This was consistent with the way in which the developer had dealt with the proceeds of sale of other lots it had sold in the development.

Conclusion

The case shows that an owners corporation that is concerned that a developer against whom it has made a claim for damages arising from building defects can take steps to protect its interests and ensure that the developer does not dissipate its assets to avoid having to pay damages to the owners corporation.  The case shows that the Supreme Court will make freezing orders against developers in appropriate circumstances to safeguard the position of owners corporations who are at risk of being left with nothing if the developers of their strata schemes are able to deal with their assets without restraint.

Case citation: The Owners – Strata Plan No. 102081 v Aqualand Constructions Pty Ltd [2025] NSWSC 31

Adrian Mueller I BCOM LLB FACCAL I Partner

Since 2002 Adrian has specialised almost exclusively in the area of strata law. His knowledge of, and experience in strata law is second to none. He is the youngest person to have been admitted as a Fellow of the ACSL, the peak body for strata lawyers in Australia. Profile I Linked

Contact Us

For all strata law advice including by-laws, building defects and levy collections contact our specialist NSW and Sydney strata lawyers here or call 02 9562 1266, we’re happy to assist.

In a significant victory for owners corporations across Australia, the High Court has ruled that builders and developers cannot escape liability for negligent construction work. The landmark decision in Pafburn Pty Limited v The Owners – Strata Plan No 84674 affirms that developers and head contractors bear a non-delegable duty to ensure the quality of construction, even if the work is outsourced to subcontractors. This ruling has far-reaching implications for the building industry and provides greater protection for property owners.

On 11 December ds2024, the High Court of Australia handed down its judgment in the case of Pafburn Pty Limited v The Owners – Strata Plan No 84674. The key findings of the decision are as follows:

Key Findings

1. Appeal Dismissed: The appeal by Pafburn Pty Limited and Madarina against the NSW Court of Appeal decision in favour of the owners corporation was dismissed with costs. This means that the decision is in favour of the owners corporation.
2. Non-Delegable Duty: The court held that the duty imposed by Section 37(1) of the Design and Building Practitioners Act 2020 (NSW) (DBPA) is a non-delegable duty. This means that the developer and the head building contractor cannot limit their liability by delegating construction work to others.
3. Proportionate Liability: The court found that the proportionate liability scheme under Part 4 of the Civil Liability Act 2002 (NSW) (CLA) does not apply to claims for breach of the duty under Section 37 of the DBPA. The liability for breach of this duty is personal and cannot be apportioned among concurrent wrongdoers.
4. Vicarious Liability: The court clarified that Section 5Q of the CLA, which deals with liability based on non-delegable duties, applies to the duty under Section 37(1) of the DBPA. This means that the developer and the head building contractor are treated as vicariously liable for the negligence of those to whom they delegated construction work.
5. Economic Loss: The court confirmed that the owners corporation is entitled to claim damages for economic loss caused by defects in the building arising from the construction work, as per Section 37(1) of the DBPA.
6. Legislative Intent: The court emphasised that the DBPA was enacted to address public concerns about building defects and to ensure that owners have effective redress for economic loss caused by such defects. The provisions of the DBPA are intended to impose individual and collective responsibility on building practitioners for their work.
7. Outcome: The matter was remitted to hearing to determine whether the list response pleading can be maintained against all alleged wrongdoers, specifically whether they can be characterised as persons who carry out construction work under the DBPA.

These findings reinforce the non-delegable nature of the duty of care imposed on developers and head contractors under the DBPA and clarify the interaction between the DBPA and the CLA. This is good news for an owners corporation because it means that a builder and developer cannot attempt to limit or apportion their liability by arguing that the work was done by someone else, in other words, their duty cannot be delegated to a subcontractor (non-delegable duty).

An owners corporation can still take direct action against subcontractors (if necessary), although the owners corporation must be able to establish that the subcontractors carried out construction work within the meaning of the DBPA and breached the duty in section 37 of DBPA. We also note that the decision does not prevent cross claims by the builder and developer.

Complex Area of Law

This is a complex area where we have significant experience please contact us if you have a similar case.

Helen Amanatiadis I LLB LLM I Lawyer

Helen is admitted as a practitioner of the Supreme Court of NSW and High Court of Australia. Highly qualified Helen has over 25 years of experience in commercial dispute resolution, with a primary focus on building and construction and strata law. Profile I Linked

Contact Us

For all strata law advice including by-laws, building defects and levy collections contact our specialist NSW and Sydney strata lawyers here or call 02 9562 1266, we’re happy to assist.

Adrian Mueller talks with Nikki Jovicic, LookUpStrata about the owners corporation’s responsibility to remedy water leaks and defects in NSW strata buildings.

Recent heavy rainfall across NSW has unfortunately led to a surge in water leaks and defects within strata buildings. These leaks can damage both common property and lot property, causing significant frustration and financial burden for apartment owners. As a result, disputes between owners and their owners corporation have become more frequent.

Understanding the Owners Corporation’s Responsibility

The Strata Schemes Management Act 2015 (NSW) clearly outlines the owners corporation’s duty to maintain and repair common property. This includes:

• Maintaining common areas: Roofs, external walls, plumbing systems, balconies, stairwells, and any other areas designated as common property in the strata scheme.
• Keeping them in a good state of repair: This means addressing any issues that could compromise the structural integrity, safety, or functionality of the common property.
• Renewing or replacing common property fixtures and fittings: Pipes, waterproofing membranes, sealant around windows, and other elements that naturally deteriorate over time.

Strict Liability and the Duty to Repair

The Act imposes a strict liability on the owners corporation for repairs. This means the owners corporation is responsible for fixing defects in the common property, regardless of cause. Even if the leak originates from faulty original construction or unforeseen circumstances, the owners corporation must address the issue.

This strict liability eliminates the option for the owners corporation to simply deny responsibility for repairs. Delays in fixing leaks, passing resolutions to avoid repairs, or claiming lack of funds are not valid excuses.

Remedies available to Lot Owners when an Owners Corporation Fails to Act

If your apartment suffers damage from water leaks or defects originating in the common property, and the owners corporation fails to take action, you have several options:

• Apply to NCAT (New South Wales Civil and Administrative Tribunal): You can file an application with NCAT seeking an order that compels the owners corporation to undertake the necessary repairs.
• Claim Damages: You can pursue compensation for losses incurred due to the water leak. This may include the cost of repairs to your unit, the replacement of damaged belongings, or lost rental income if you were unable to rent out your unit while repairs were ongoing.
• Administrator Appointment: In extreme cases, NCAT can appoint someone to manage the owners corporation and organise repairs. The compulsory strata manager will take control of the owners corporations affairs and arrange for the repairs to be completed.

Making a Strong Claim for Water Leaks and Defects as a Lot Owner

To maximise your chances of a successful claim, it’s crucial to have a well-documented case. You should:

• Verify Ownership: Ensure you are the current owner of the affected unit at the time of the claim.
• Identify the Source: Identify the specific defects in the common property causing the water leaks. This often involves obtaining a professional inspection report from a qualified specialist.
• Scope of Works: Outline the necessary repairs in a scope of works document. This document should be based on the expert’s recommendations and clearly define the repairs needed to address the leak and prevent future occurrences.
• Proof of Losses: Gather evidence to substantiate your financial losses. Receipts for repairs to your unit, damaged furniture replacement costs, and rental agreements proving lost income are all valuable documents.
• Timely Action: Don’t delay! File your claim with NCAT within two years of becoming aware of the water leaks, defects and the resulting damage.

The strict liability makes it difficult for owners corporations to argue they are not responsible for repairs.

Adrian Mueller’s final thoughts for those owners corporations still avoiding their responsibility, at the end of the session: “that’s the law, like it or not…… sometimes you just have to suck it up”.

Adrian Mueller I BCOM LLB FACCAL I Partner

Since 2002 Adrian has specialised almost exclusively in the area of strata law. His knowledge of, and experience in strata law is second to none. He is the youngest person to have been admitted as a Fellow of the ACSL, the peak body for strata lawyers in Australia. Profile I Linked

Contact Us

For all strata law advice including by-laws, building defects and levy collections contact our specialist NSW and Sydney strata lawyers here or call 02 9562 1266, we’re happy to assist.

Introduction

It is an unfortunate reality that many strata apartment buildings contain defects.  Many of those defects are widespread or systemic defects that affect most or all of the lots.  But how far does an owners corporation have to go to prove the existence of systemic defects?  Does the owners corporation have to organise for its experts to inspect each and every lot to prove that those systemic defects exist in each lot?  A recent Supreme Court case provides the answer to that question.

The Case

There is a strata complex containing 45 townhouses in Tweek Heads South.  The complex was built in about 2018 and 2019.  There are defects in the complex.

In 2021, the owners corporation of the complex sued the builder for damages to (among other things) cover the cost to rectify defects throughout the complex.  In the case, the owners corporation claimed that several defects were systemic and present in numerous townhouses.  One of those defects related to waterproofing defects at the outer edge of balconies above garage doors of many townhouses.

The parties’ experts agreed that the beam which spans the outer edge of the balconies on two of the townhouses suffered moisture damage due to the same waterproofing defect on the balconies of those townhouses.  However, the owners corporation’s expert did not inspect any of the other townhouses or carry out any investigations to prove that those defects existed in them.  The builder denied that those same defects existed in the other townhouses and claimed that the owners corporation had not proved its case in that regard.

Proving the Existence of Systemic Defects

The Court agreed with the builder and concluded that the owners corporation had not proven, on the balance of probabilities, that the waterproofing defects and moisture damage to the beams on the outer edge of the balconies existed in any of the other townhouses.  In other words, the Court concluded that the owners corporation had not proven that those defects were systemic.

The Court relied heavily on an earlier decision in The Owners – Strata Plan No. 62930 v Kell & Rigby Holdings Pty Ltd [2010] NSWSC 612.  In that case, the owners corporation of a block of 14 units argued that no water stops had been installed by the builder in the bathrooms of all 14 units.  The owners corporation’s expert evidence only proved that there were no water stops in the bathrooms of three units.  But the owners corporation claimed that the lack of water stops was a systemic defect present in all of the bathrooms.

The Court held that it could not be inferred from the evidence that established that there were no water stops in three bathrooms that waterproofing work was incorrectly performed in other units and observed that the fact that the waterproofing contractor defectively performed work in a small number of units did not warrant a conclusion that it did so everywhere else.  Importantly, the Court concluded that the burden of proof lay on the owners corporation and that it had chosen to carry out limited destructive testing in three bathrooms only when there was no reason why it could not had done so in all of the units.

In the case involving the townhouse complex in Tweed Head South, the Supreme Court followed the reasoning in Kell & Rigby and concluded that there was insufficient evidence available to support the inference that the balcony waterproofing defect in two townhouses provided a basis for finding that the same defect existed in all 26 townhouses which have front first floor balconies.

Importantly, the Court held that it could not rely on the opinion of the owners corporation’s expert that the defect was systemic due to similar construction details being present in all townhouses because it was not known whether the waterproofing defects that had been identified in two of the townhouses were caused by faulty design or shoddy workmanship.  For all of these reasons, the Court rejected the owners corporation’s claim that the defect on the outer edge of the balconies was a systemic one that affected all such balconies and instead only accepted that the defect existed in two of the balconies that had actually been inspected and tested by the owners corporation’s experts.

Conclusion

The case provides a salutary lesson for owners corporations who wish to pursue a claim against a builder, developer or subcontractor for systemic defects.  Typically, the owners corporation will need to go the extra mile and pay its expert to inspect more than just a handful of lots to ensure that adequate testing and investigations are undertaken to enable the expert to form an opinion that will allow the owners corporation to prove, on the balance of probabilities, that the defect in question is widespread and systemic.  In some cases, this will require the expert to inspect and undertake testing and investigations in all of the lots, which in a large strata building, can be expensive.  But that is the unfortunate price an owners corporation must sometimes pay in order to succeed in a claim with respect to systemic defects.

Case: The Owners – Strata Plan 99960 v SPS Building Contractors Pty Ltd [2024] NSWSC 687

Adrian Mueller I BCOM LLB FACCAL I Partner

Since 2002 Adrian has specialised almost exclusively in the area of strata law. His knowledge of, and experience in strata law is second to none. He is the youngest person to have been admitted as a Fellow of the ACSL, the peak body for strata lawyers in Australia. Profile I Linked

Contact Us

For all strata law advice including by-laws, building defects and levy collections contact our specialist NSW and Sydney strata lawyers here or call 02 9562 1266, we’re happy to assist.

Who is Responsible for Common Property Repairs Caused by Rain?

Sydney smashes another record rainfall in May 2024 (to date) with a deluge of rain over the past weeks across metropolitan and regional areas of New South Wales.

Extensive rainfall events test the patience of every strata manager resulting in numerous complaints about water leaks into strata lots.

Faced with endless demands, owners corporations need to be very clear about their responsibilities, so it’s timely to revisit some of the “fundamentals”.

In the article below we discuss…

Step 1 – Is it the owners corporation’s responsibility?

Step 2 – If it leaks has the common property failed?

Step 3 – Are damages payable by the owners corporation for common property failures?

For more information: Rain and Common Property Damage – Who is Responsible?

Warwick van Ede I BEc LLM I Lawyer

Since 1990, Warwick has specialised in strata law, property law and litigation. Recognised for his expertise, he is also a NSW Law Society Accredited Specialist in Property Law. In 2021 he was selected to serve on the Property Law Committee of the Law Society of NSW. Profile I LinkedIn

Contact Us

For all expert strata law advice including by-laws, building defects and levy collections contact our specialist NSW and Sydney strata lawyers here or call 02 9562 1266, we’re happy to assist.

Adding Further Building Defects to an Existing Claim

On 17 April 2023, the New South Wales Court of Appeal in the case of Parkview Constructions Pty Ltd v The Owners – Strata Plan No. 90018 (Parkview), confirmed that an owners corporation can add new defects to an existing claim if the statutory warranty period in the Home Building Act 1989 (HBA) has not expired.

Supreme Court Amends Building Defects Statement of Claim

In the Parkview case, in the Supreme Court, the owners corporation sought to amend its Statement of Claim to add new defects. The Supreme Court granted permission to the owners corporation to add new defects to its existing claim.  The new defects that were added were not manifest when the owners corporation-initiated proceedings in the Supreme Court. Parkview appealed against the decision of the Supreme Court to the Court of Appeal.

Court of Appeal Win for Owners Corporation

The Court of Appeal upheld the decision of the Supreme Court by confirming that the owners corporation was entitled to add new defects to its existing claim and the addition was not a new cause of action but part of a single cause of action being a breach by the builder of the statutory warranties under the HBA.

Parkview argued that the addition of new defects introduced a “new” cause of action, and those new causes of action were not the same as the existing cause of action that was on foot. The Court of Appeal rejected that argument. It held that in a conventional case for breach of contract, there is a single cause of action.  That cause of action is complete when a defective structure is provided irrespective of the number of ways in which those defects have manifested themselves.  The Court of Appeal said that even though the HBA has created inroads into common law principles, however, those changes brought by the HBA do not alter the nature of the owners corporation’s claim.

Furthermore, the Court of Appeal said that a successor in title like an owners corporation sues a builder or a developer for statutory warranties under the HBA. The proceeding is based upon a breach of a single contract.  An amendment does nothing more than introduce further departures from the building contract that the builder and the developer had promised and that does not give rise to a new cause of action because the cause of action remains one, that is for a breach of the same contract.  Accordingly, the Court of Appeal held that the owners corporation’s amendments seeking to add new defects did not introduce a new cause of action and so the owners corporation was entitled to add them to its existing claim.

A Victory for Owners Corporations in NSW

This confirmation from the Court of Appeal is a great victory for owners corporations in NSW and it reconfirms the willingness of the judiciary to protect owners in strata schemes wherever it may be necessary.

Faiyaaz Shafiq I LLB GDLP I Lawyer

A highly experienced and respected, results driven Litigation Lawyer specialising in the areas of strata litigation, building & construction, commercial litigation, debt recovery, personal and company insolvency. Profile I Linked

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