Flammable cladding: The Quay Haymarket builder loses in court

A never-ending legal nightmare for hundreds of apartment owners in a Sydney development inched closer to resolution this week after a court ruled against the builder in a dispute over potentially deadly combustible cladding.

But owners at The Quay in the inner-city suburb of Haymarket have been told they must fork out up to $30,000 per unit to pay for the dangerous material to be replaced, at a total cost of more than $12 million. And a final decision on whether they will be reimbursed is likely to be tied up in courts for years to come as their legal fees balloon.

The tender for the remediation work – coming more than three years after the council issued a fire safety order on the building, and six years since London’s Grenfell Tower disaster that claimed 72 lives – will be discussed by the owners corporation at an extraordinary general meeting on May 1.

“The way construction works in Sydney, it probably will end up double,” said one man, who owns two units in the building and is “up for $60,000”.

“There’s so many people suffering because of this. It’s messed up. The government needs to step in and pay up. Pressure needs to be put on the new government.”

The Quay, a 286-unit, mixed-use development built on the site of the old poultry section of Paddy’s Market in Chinatown, was one of 435 identified as “potentially high-risk” by the NSW government’s Cladding Taskforce in 2018.

Owners started legal proceedings in the NSW Supreme Court against the Chinese-backed developer Ausbao and builder Parkview Constructions in 2020 over the allegedly defective aluminium cladding panels – which at the time of construction, were not deemed unsafe.

The Grenfell disaster and the subsequent ban on aluminium cladding opened a legal can of worms over who would be responsible for the cost of remediation.

The Quay’s case, which alleges breaches of statutory warranties under NSW’s Home Building Act 1989, was believed to be the first for cladding.

As of February this year, NSW’s Cladding Taskforce had inspected 4182 buildings with 3803 cleared. There are currently 379 buildings under review, assessment or remediation.

Of those, more than 200 are in the process of replacing cladding, with some, including The Quay, going through the government’s Project Remediate.

This week, the NSW Court of Appeal ruled against Parkview Constructions, agreeing with the lower court that three new defect claims, including the major claim for the cladding, could be added to its original warranty litigation which commenced “so long ago” as August 2016.

That warranty claim originally cited 85 defects, some of which were “on any view extremely minor”, the court noted, and all of which have since been rectified or resolved.

The latest dispute turned on whether the three new defects brought forward in 2021 – more than six years after the building was completed in 2014 and therefore outside the window for “major” defects — required a new cause of action or could be dealt with under the same breach of contract claim.

In their decision on Monday, the three-member Court of Appeal panel led by Justice Julie Ward expressed some bemusement at the glacial pace of the litigation.

“The dispute in this court is confined to that part of the interlocutory decision that permitted the owners corporation to amend its Technology and Construction List Statement to include the three new claimed defects summarised above,” they wrote.

“At least in part, the parties had known of these defects for many years. For example, in March and May 2018, expert reports were obtained by the owners corporation and the builder concerning the cladding on the building.

“The court was not taken to any evidence (if there was any) explaining why the Technology and Construction List Statement had not, years earlier, been amended to reflect the claims that the cladding was defective.

“The motion seeking leave to amend seems to have progressed at the same languid pace as other aspects of this litigation. It was filed on 16 July 2021, but an amendment was served on 9 February 2022 and it was heard on 11 August 2022.”

Ultimately the Court of Appeal found that “the primary judge was correct to proceed on the basis that, in this case, there was a single cause of action being prosecuted against each of the builder and the developer, and that the amendments did not introduce a new cause of action”.

“At least ordinarily, an amendment which does nothing more than introduce further departures from the building as promised will not give rise to a new cause of action which would otherwise have been out of time … because the cause of action is for breach of the same contract,” the panel said.

“That will not be the case if, say, a plaintiff sues a developer and then, out of time, applies to bring proceedings against the builder, but that is because there is a different cause of action on a different contract. Nor will it be the case if the plaintiff introduces a new cause of action such as negligence.”

The Court of Appeal ordered Parkview Constructions and Ausbao to pay costs to the owners’ corporation.

Ausbao and Parkview Constructions did not respond to requests for comment.

A spokesman for the building’s strata management company Bright & Duggan said as the case was still ongoing, the owners’ corporation “do no wish to make any comments with regards to the Court of Appeal decision”.

A City of Sydney spokeswoman confirmed that a fire safety order was issued to The Quay in February 2020.

“The order requires the building’s owners to remove and replace external combustible cladding and the work is to be carried out in stages,” she said.

“We would encourage building owners to carry out remediation work as soon as they are able. We are unable to comment further as the matter is before the courts.”

In a notice to owners last week about the EGM, property manager JLL said a quote for the rectification work had come in at $12.37 million excluding GST.

“Please note this amount is for entire cladding replacement which includes the share for the other two members of the building management committee, which include the retail stratum lot and the supermarket lot,” the email said.

The specific share for the owners corporation will be approximately $10.89 million, which will be paid for via a $13 million loan from Austrata Finance.

“This hybrid loan provides a flexible funding arrangement by allowing some owners to pay upfront and have no more to pay and save paying strata loan interest while allowing other owners to spread their share of the project cost over the life of the strata loan,” the email said.

Speaking to news.com.au, the unit owner said it was ridiculous that it had “been seven years and we’re still at entrees”.

“We’re [not] even at trial yet,” he said.

“Now the delays and appeals continue. I wonder how much has been spent on legal fees and if the eventual settlement will even cover the legal fees. It’s just a s**tshow enriching the lawyers as the government has washed their hands of it.”

Meanwhile, he added, there were “hundreds of dog boxes” around the state still with dangerous cladding posing a major fire risk.

Speaking to Domain in 2020, The Quay’s strata committee chair Tina Murolo said she and other owners were living in fear.

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“Grenfell Tower took only 90 minutes to be engulfed in flames and that’s never far from my mind,” she said.

“I have a little panic attack each time I hear anything because we have two buildings with combustible cladding, basically wrapped in petrol blankets, and if there were a fire, I have no doubt that lives would be lost.”

frank.chung@news.com.au

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