Body Corporate for HQ Apartments CTS 39869 v Queensland Building and Construction Commission [2016] QCAT 115

CITATION: Body Corporate for HQ Apartments CTS 39869 v Queensland Building and Construction Commission [2015] QCAT 115 PARTIES: Body Corporate for HQ Apartments CTS 39869 (Applicant) V Queensland Building and Construction Commission (Respondent) APPLICATION NUMBER: GAR158-15 MATTER TYPE: General administrative review matters HEARING DATE: 27 April 2016 HEARD AT: Brisbane DECISION OF: Member Gordon DELIVERED ON: 12 May 2016 DELIVERED AT: Brisbane ORDERS MADE: The decision of the Queensland Building and Construction Commission of 12 June 2015 is confirmed. CATCHWORDS: DIRECTION TO RECTIFY – where current problems in building because of product defect – where defect not detectable by competent builder - whether unfair to the builder to give a direction to rectify Queensland Building and Construction Commission Act 1991 (Qld), s 72 Imperial Homes (Queensland) Pty Ltd v Queensland Building and Construction Commission [2014] QCAT 42, applied REPRESENTATION: APPLICANT: Represented by Lynda Kypriadakis, building advocate of Diverse FMX Pty Ltd RESPONDENT: Represented by Brendan Szima, lawyer, Queensland Building and Construction Commission -- 1 of 15 -- 2 REASONS FOR DECISION [1] This matter concerns a 9 story residential unit complex in Chermside with commercial lots below. It has serious problems of cracking, bulging and delamination of the walls. There is early deterioration of metal components in contact with the walls. There are serious continuing dampness problems. The main problems were traced to a defect in the prefabricated walling system used by the builder. [2] Extensive work is required to remedy these problems. The body corporate complained to the Queensland Building and Construction Commission.1 The Commission issued the builder with a direction to rectify but excluded from this direction anything connected with the prefabricated walling system on the basis that it was unfair to expect the builder to remedy defects which arose from a product defect outside the builder’s control. [3] The body corporate now seek a review of this decision, arguing that it would not be unfair to direct the builder to remedy all defects in the building. The unfairness issue [4] The question of unfairness arises from the words of section 72(5) of the Queensland Building and Construction Commission Act 19912 which provides:- (5) The commission is not required to give the direction if the commission is satisfied that, in the circumstances, it would be unfair to the person to give the direction. Example for subsection (5)— The commission might decide not to give a direction for the rectification of building work because an owner refuses to allow a building contractor to return to the owner’s home or because an owner’s failure to properly maintain a home has exacerbated the extent of defective building work carried out on the home. [5] Section 72(2) of the Act gives the Commission power to direct the person who carried out building work to rectify the work and to remedy consequential damage caused by the work, if the work was defective or incomplete. It is clear that the Commission has a discretion whether or not to issue a direction to rectify in any particular case. This is because of the use of the word “may” in section 72(2). It also appears from the wording of section 72(3) under which the Commission when making its decision may consider all the circumstances it considers are reasonably relevant. [6] One of the circumstances pressed by the representative of the body corporate at the hearing to show that it would not be unfair for the builder to be directed to rectify all the defects in the building was the misfortune faced by the unit owners in the building. Having purchased units which they were fully entitled to expect would be built to a proper standard, they have ended up with a sub-standard properties. This has caused distress, inconvenience 1 in fact to its predecessor the Queensland Building Services Authority 2 formerly in section 72(14) of the Queensland Building Services Authority Act 1991 -- 2 of 15 -- 3 and financial loss and also involved them in a lengthy dispute, including Supreme Court proceedings. [7] The question arises whether these unfortunate circumstances are “reasonably relevant” considerations for section 72(3), and whether they may be taken into account when deciding under section 72(5) whether “in the circumstances, it would be unfair to the (builder) to give the direction”. [8] On the face of it, section 72(5) permits an examination of the fairness of a direction exclusively from the point of view of the builder. It could easily have been worded differently had the legislature intended that there should be a balancing of unfairness to the complainant if a direction were not to be made, against unfairness to the builder if a direction were to be made. No such balancing of fairness is contemplated by section 72(5). [9] However, this does not mean that the circumstances of the complainant should be ignored altogether. Section 72(3) permits the Commission to consider all the circumstances which it considers are reasonably relevant when deciding whether to give the direction, and section 72(5) itself permits a consideration of the “circumstances”. Section 3(a)(ii) of the Act states one of the objects of the Act as being “to achieve a reasonable balance between the interest of building contractors and consumers”. [10] It is clear therefore that although the test in section 72(5) is whether from the point of view of the builder a direction would be unfair, all relevant circumstances can be considered and they can include the circumstances in which the unit owners find themselves. [11] The tribunal’s role on review is to produce the correct and preferable decision and it must hear and decide the review by a fresh hearing on the merits.3 Effectively the tribunal stands in the shoes of the Commission when making a decision.4 Since there is a fresh hearing, it is the circumstances as at the date of the tribunal’s hearing which are relevant. The items in the complaint which the builder was not directed to rectify [12] The Commission directed the builder to rectify a number of items, but declined to do so where it considered it would not be reasonable or would be unfair to do so. The Commission listed these items under “reasonability” and by directions of the tribunal the issue before me is limited to whether the items of complaint listed under reasonability should have been on that list or whether the Commission should have directed the builder to rectify those items.5 [13] The “reasonability” list is extensive, but can conveniently be divided into six types as shown on this table.6 3 section 20 of the Queensland Civil and Administrative Tribunal Act 2009 (the QCAT Act) 4 section 19 of the QCAT Act provides that the review must be decided in accordance with the Act under which the Commission operates and applying the Commission’s functions 5 directions of 17 September 2015 and 20 October 2015 6 the references are to the “complaint numbers” in SOR-37 which formed the basis of the decision letter dated 12 June 2015 -- 3 of 15 -- 4 Table of types of defects where, on the grounds of “reasonability”, no direction was made 1 The failure or prospective failure of the walling system or its immediate surface coat, causing cracking, bulging, delamination and water ingress. Complaint numbers 3, 9, 10, 11, 12, 13, 14, 16, 17, 19, 20, 22, 23, 26, 28, 57, 64, 66, 69, 82, 84, 85, 86, 89, 113, 118, 120, 127, 128, 135, 142, 143, 148, 150, 159, 165, 166, 168, 190, 192, 198, 203, 204, 206, 221, 233, 240, 264, 273, 275, 279, 280, 283, 284, 285, 286, 292, 295, 298, 299, 300, 301, 302, 303, 304, 308, 311, 312, 313, 316, 321, 334, 337, 338, 339, 346, 348, 351, 352, 357 and 358. 2 The failure properly to waterproof or seal parts of the building. Complaint numbers 1, 8, 18, 21 (unprotected extractor vents in the external wall), 4 (opening of joint between building and Pad Mount enclosure), 95 (water entering under door to level 9 foyer). 3 The deterioration of metal attachments to or components of, the walling system. Complaint numbers 5, 98, 119, 121, 126, 133, 136, 141, 144, 149, 151, 157, 161, 170, 181, 185, 187, 189, 235, 261, 296 and 345 (various rusting steel door frames throughout in the building in contact with the walling system); 2 and 7 (spitters on the balconies); 27 (rust spots on wall of wash down area); 36 (steel gate/door supports to the garage entrance); 41 (garage chute supports); 56, 59, 62, 65, 72, 73, 77, 79 (rust to door frames, wall areas, conduit brackets, tap flange, flashing, riser and at level 9 pool area); and 186, 188, 191 and 202 (various steel stringers and risers to stairway in the lower part of the building. 4 Other complaints which were found to be unsatisfactory on inspection but which had been, or were being, rectified by the body corporate. Complaint numbers 45 (skylights to roof incorrectly fitted), 51 (sealing of scribe to the upstream ends of roof sheeting around the lift overrun), 53 (sealing of laps on roof sheeting). 5 Other complaints which were found to have been rectified or not the builder’s defective construction works on inspection. Complaint number 110 (full height glass doors which could be mistaken for a path of travel); 114, 122, 130, 137, 145, 152, 162, 259 (fire collars on riser to foyers on level 3 to 9 and car park 1A respectively); 176 (loose data cable in FHR cupboard on level 2 foyer); 223 (no temperature gauge for water heater); 229 (fire collars rusted from trade waste pipe); 236 and 237 (mass cables going through ceiling in car park 1B affecting fire safety); 241 (no registration on grease trap in car park 1A); 258 (sewer pipe leak to car park 1A); and 320 (ceiling skylight). 6 One item of complaint not dealt with because it was a duplicate complaint. Complaint number 288. -- 4 of 15 -- 5 The body corporate’s case [14] Three important issues were strongly argued on behalf of the body corporate. In a nutshell they are:- (a) There was no proof that boards of any particular sort had been used for the formwork in the walling system. (b) There was nothing to show that the boards were any more hygroscopic than any other type of board or that the boards contained a concentration of a corrosive chemical. (c) In any case, the true cause of the problems was that the builder had not properly sealed and waterproofed the building. If this had been done the problems with the walling system would not have been symptomatic. [15] It was said that on this basis it would be fair to order the builder to rectify the building work. [16] Therefore, it was submitted, the builder should be directed to rectify:- (a) All category 1 defects allowing water to ingress the structural and habitable areas of the property. (b) All category 1 defects adversely affecting the durability and structural integrity of the property; (c) All category 1 defects posing a health and safety hazard or issue for occupants, visitors and workers on the property. [17] The reference here to category 1 defects is a reference to the Commission’s policy document entitled “Rectification of Building Work” approved by regulation on 1 July 2004 which applied at the time.7 This is known as the “defects policy”. This does not provide guidance on the question of unfairness, but instead provides guidance on the circumstances which the Commission would consider as reasonably relevant when deciding whether to make a direction to rectify. It follows that there is no guidance relevant to this case on the question of unfairness. [18] On the question of reasonably relevant considerations, the 2004 policy states:- It is a guideline policy of the Queensland Building Services Board that a person who carries out category 1 or 2 defective building work should be required to rectify that building work, unless in all the circumstances rectification is an unreasonable remedy. Under section 72(1) of the Queensland Building Services Authority Act 1991 (the Act), if the Queensland Building Services Authority (the Authority) is of the opinion that building work is defective, the Authority may direct the person who carried out the building work to rectify it. In deciding whether to give a direction for rectification of building work, the Act allows 7 this applies because the contract to construct the building in question was made on 25 November 2007 -- 5 of 15 -- 6 the Authority to take into consideration all the circumstances it considers are reasonably relevant. Those circumstances might include any delay by an owner in notifying the Authority of a defect, where the delay: (a) in respect of a category 1 defect, exceeds 3 months after the defect became apparent; or (b) in respect of a category 2 defect, exceeds: (i) 6 months after the building work was completed or left incomplete; or (ii) 7 months, if the owner notified the contractor of the defect within 6 months after the building work was completed or left incomplete. [19] The category 1 and category 2 defects referred to here are described in the policy as follows (this is a partial reference only):- Category 1 Defective Building Work For the purposes of this policy, category 1 defective building work is: A. Building work (other than residential construction work causing footing or slab movement) that is faulty or unsatisfactory because it either: (a) adversely affects the structural performance of a building; (b) adversely affects the health or safety of persons residing in or occupying a building; (c) adversely affects the functional use of the building; or (d) allows water penetration into a building. Examples of category 1 defective building work include: • leaks in roofs, showers, doors, windows or walls; • faulty or inadequate flashing; • faulty or inadequate damp proof course; • fretting or spalling masonry; • inadequate strength mortar; • extensive cracking or distortion of wall or ceiling lining beyond normal frame settlement; • shrinkage or thermal movement; • extensive cracking or dislodgement of floor or wall tiles; • defective, incomplete or inadequate termite protection methods; • inadequate provision for discharge of roof water; • incorrect or inadequate site drainage; • paint – large areas delaminating – adhesion failure; and • use of materials not fit for the purpose. Category 2 Defective Building Work For the purposes of this policy, category 2 defective building work is building work that is faulty or unsatisfactory because it does not meet reasonable standards of construction and finish or has caused a “settling in period” defect in a new building. Examples of category 2 defective building work include: • sticking doors or windows; • cracked plasterboard joints, cornice joints; and • poor finishing detail, including paint work. [20] It is necessary for me to have regard to this policy document. As stated by Member Paratz in Imperial Homes (Queensland) Pty Ltd v Queensland Building and Construction Commission [2014] QCAT 42 at [49]:- -- 6 of 15 -- 7 The defects policy is a policy to which the Commission is to have regard, and to which the Tribunal will have regard. The effect of it is to assist in the assessment of what is fair. I do not consider that strict compliance with each of its provisions is required having regard to the strict wording only, rather regard is to be had to the intent. [21] The policy applying at the time to this case provides guidance as to the reasonably relevant circumstances rather than fairness and so this passage needs to be read with that in mind. The approach taken to findings of fact in this decision [22] As often happens in these types of cases, there were a number of documents provided to the tribunal. Some of these were expert’s opinions presented without any formality.8 Many such expert opinions contained material which, if accepted in evidence, were highly relevant to the issues. [23] There were also a number of documents which would have been of relevance which were not provided to the tribunal. From the Commission’s point of view, the difficulty is that it has no powers to obtain documents from third parties to assist in its decision making.9 Sometimes the tribunal will call for documents or information as a matter of good case management, and because the tribunal can inform itself in any way that it considers appropriate10 and must ensure as far as practicable that all relevant material is available11. But this is much more difficult to do at the hearing. [24] Almost all of the documents which would have been relevant were in the possession or control of the body corporate. For example, in this case it would have been useful to have had the contractual documents, quotes for remedial work which might have shown the scope of remedial work required, and some detail about remedial work which had already been done. There was also very limited information about Supreme Court proceedings brought by the body corporate and unit owners12 - only the Statement of Claim was available (no other pleadings). And it was clear form the Statement of Claim that there was another expert report relied on in those proceedings which was not being relied on in this review and which had not been provided to the Commission.13 [25] There was no statement from the builder which would have been helpful. [26] I discussed with the parties at the outset about the correct approach to the evidence. Both sides agreed that I could take into evidence all the presented material, except that the body corporate objected to the supplementary report of Core Projects dated 9 December 2013 on the basis 8 formality is required by Practice Direction No.4 of 2009 9 although once the tribunal’s proceedings are under way it could apply to use the tribunal’s powers to order disclosure from third parties 10 section 28(3)(c) of the QCAT Act 11 section 28(3)(e) of the QCAT Act 12 a claim brought against the builder Jadecorp, the landowner Jadecorp Properties Pty Ltd, the developer Properties 84 Pty Ltd, and against Architectural Framing Systems 13 this was a report by GHD relied on by the body corporate in the Supreme Court proceedings which was not available -- 7 of 15 -- 8 that the report seemed to say that the boards contained magnesium oxide yet did not exhibit any laboratory tests which lead to that conclusion. [27] Bearing mind that the tribunal is not bound by the rules of evidence, may inform itself in any way it considers appropriate and must act with as little formality and technicality as may be permitted, I took the view that it would be right to have regard to this supplementary report despite this objection. Naturally I would have regard to the objection when considering how much weight to give to it. [28] Practice Direction No. 4 of 2009 requires certain formalities before expert evidence can be adduced at all, and in so far as there is any conflict in the expert’s opinions requires an expert’s conclave, unless otherwise ordered by the tribunal.14 I directed that Practice Direction No. 4 of 2009 shall not apply to this matter. [29] I made these decisions because I was satisfied following discussions with the parties that it was possible and fair on the available information and documents, bearing in mind that certain factual admissions had been made at the hearing, to make appropriate findings of fact on the balance of probabilities. [30] The expert’s opinions to which I had regard were:- Brad Nicholls, structural engineer of ICPS Australia Pty Ltd. Report dated 21 October 2010 about water penetration in the penthouse.15 John Groom of J. Groom Building Consulting report dated 6 June 2013 which listed 279 defects in a schedule. This was used to support the original complaint to the Commission. Nenad Vrbancic and John Van De Hoef, structural engineers of NJA Consulting Pty Ltd. Report dated 5 September 2013 addressed to the body corporate as a result of a site inspection on 23 August 2013.16 Report dated 10 October 2013 addressed to the body corporate’s solicitors.17 Warren Green, corrosion engineer of Vinsi Partners. Report dated 8 November 2013 addressed to Jadecorp’s solicitors and submitted to the Commission by them.18 Greg Beard, John Butterworth and Darren Hansen engineers of Core Project Consulting. Preliminary report dated 14 November 2013 prepared for Jadecorp’s solicitors.19 Supplementary report dated 9 December 2013.20 14 Practice Direction No. 4 of 2009 15 exhibit EA-04 in the evidence submitted on behalf of the body corporate 16 exhibit EA-05 in the evidence submitted on behalf of the body corporate (the attached photographs are at pages 893 to 899 of the bundle) 17 exhibit EA-06 in the evidence submitted on behalf of the body corporate (the attached photographs are at pages 876 to 890 of the bundle) 18 pages 781 to 856 19 page 1024 20 page 1033 -- 8 of 15 -- 9 The Commission’s inspection reports. Report dated 12 August 2014 (Scott MacDonald and David Howarth).21 Report dated 29 October 2014 (David Howarth).22 Report dated 15 May 2015 (Steven Noble).23 [31] Mr Noble also made an affidavit on 24 March 2016 and gave evidence at the hearing. Findings of fact [32] On the question whether there is sufficient evidence to show that the board used in the formwork were any particular sort, in my view the evidence is overwhelming. It was strongly suspected that they were magnesium oxide or similar material from a visual inspection of the boards and also from the nature and extent and speed of the deterioration of the building by J Groom, also by Mr Van De Hoef of NJA Consulting, who are the body corporate’s own experts. [33] Mr Green, the corrosion expert instructed by the builder, did not know what boards had been used, but found that it was likely that the cracking and delamination to the panels was due to “chloride-ion induced corrosion of the galvanised steel stud frame sections”24 and that this chemical reaction was the cause of deterioration of metals in contact with the boards.25 [34] Confirmation of the make up of the boards appears in the supplementary report by Core Consultancy. Whilst I accept that the test reports are not in the paperwork, it is clear from the preliminary report and the subsequent report that between the two, tests were conducted.26 [35] Whilst I accept the submissions made on behalf of the body corporate that there are a number of different types of boards which could be described as magnesium oxide or similar boards27, Mr Green says that all the various types of magnesium board contained some chloride based salts capable of causing the problems.28 [36] In paragraph 23(b)(ii)(A) of the amended Statement of Claim in the Supreme Court proceedings it is pleaded against the builder that it used a walling system containing magnesium oxychloride “which is recognised in the industry as being unsuitable for environments exposed to water/high humidity due to swelling and the diffusion of chlorides that facilitate corrosion in metal”. It is then pleaded that this fact is shown in the GHD Assessment Report which has been disclosed to each defendant prior to the date of the amended Statement of Claim. Whilst this assertion would 21 page 1045 22 page 1373 23 page 1464 24 paragraphs 4.2.1 25 paragraphs 4.4 and 4.5 26 3 samples of the boards and the applied render/coating systems were taken from site and analysed microscopically with the Magnesium oxide board “clearly identified” (paragraph 2.2.2 of the supplementary report) 27 Mr Green of Vinsi Partners explains that apart from fibre cement the boards could be magnesium board, magnesium oxide board, or MgO/magnesium chloride (MgCl2) board 28 paragraphs 5.1.2 to 5.1.4, 5.1.7, 5.1.8 -- 9 of 15 -- 10 bind the body corporate in the Supreme Court proceedings only, it is highly persuasive before me. It appears from this pleading that it has been found that the boards are properly described as magnesium oxychloride boards. This accords with the view of those experts who have opined that the metal corrosion has been caused by chloride ions. [37] I turn to the second main argument made on behalf of the body corporate, that there is no evidence about the extent to which the boards were hygroscopic or contained corrosive chemicals. I accept the submission that these characteristics can vary between different types of boards29 and that there is no evidence about them in the particular boards used. But having concluded as I have done that it is the constitution of the boards which is the cause of the problems in this building, it follows that they must have had the characteristics which caused those problems. [38] I deal with the third main argument made on the body corporate below. [39] Accordingly these are the facts which I find in this matter:- (a) On 23 November 2007 the developer of the property, Properties 84 Pty Ltd, made a contract with the builder, Jadecorp Constructions Pty Ltd, for Jadecorp to build the premises for a base figure of $13,778,260 plus GST.30 (b) Construction was started in 2008 and completed in about March 2009. (c) Although the design was for a blockwork construction, the builder was permitted by the contract to decide a different method of construction.31 (d) The builder decided to construct the building using the AFS Logic Wall System made by Architectural Framing Systems. This system used prefabricated wall and floor panels which could be linked together on site with reinforcing steel rods ready for concrete to be poured inside the panels. The panels were made out of galvanised steel sections with bonded formwork boards on each side to form a sandwich. The manufacturers stated that the formwork boards could be coated and used as an interior or exterior substrate.32 (e) The AFS Logic Wall System was recognised at the time as acceptable for use in a building of the sort to be constructed and in compliance with Australian Building Standards. (f) On 19 February 2008 the builder contracted with Manako Constructions Pty Ltd33 to supply and install the wall and floor panels. At some point during the currency of this contract Manako was unable to continue, and this work was completed by others. 29 Mr Green of Vinsi Partners confirms this at paragraph 5.2.1 30 this appears from paragraphs 17 and 18 of the Statement of Claim 31 an agreed fact at the hearing 32 AFS Logic Wall System manuals of 2004 page 1182 33 a company which is now deregistered -- 10 of 15 -- 11 (g) The panels supplied to the site and used in the construction of the building were defective in that the formwork bonded to the galvanised steel sections were magnesium oxychloride boards. (h) Such boards tend to be significantly more hygroscopic than other materials, for example fibro cement or blockwork. Therefore, they attract moisture to a greater extent than such other materials. Such moisture can be attracted into the boards through a waterproof layer having been applied in the manner done here, because such layers are permeable. (i) Such boards also contain chloride which is released upon their getting damp. The chloride ions are corrosive to metals causing them to rust. (j) The relevant AFS Logic Wall System manufacturer’s documentation stated that fibro cement boards were used for the formwork in their product.34 (k) It would not have been apparent to a reasonably competent builder without making tests, that AFS Logic Wall System panels used magnesium oxychloride boards for the formwork rather than fibro cement boards.35 (l) The operatives and officers of Jadecorp were not aware at the time of construction that the AFS Logic Wall System panels actually used on site used magnesium oxychloride boards for the formwork rather than fibro cement boards.36 (m) There is no complaint about the external coating of the walls to the building.37 (n) In October 2010 there was water ingress into the penthouse. It was found that this was caused by numerous defects in the roof and fittings in the roof and surrounding areas and possibly also by defective rendering, sealing and painting. The roof was made watertight following this event. (o) In June 2013 John Groom of J Groom Building Consulting, identified numerous problems with the building. Walls were described as “blowing apart” with boards cracking and delaminating in many areas. Rust was affecting all parts of the building in varying degrees both internally and externally but in particular where metal components were contact with the walling system. There was an ongoing dampness and mould problem in numerous parts of the building. 34 the documentation provided to Jadecorp is at page 1182 35 this was not an agreed fact, but appears from Mr Haworth’s report on page 1377 and from paragraph 65(c) of the body corporate’s Statement of Claim in the Supreme Court proceedings 36 although there was no evidence directly from Jadecorp on this matter there are a number of references to this being their position stated in meetings and to those who discussed it with them; since there is nothing showing to the contrary this is a fair conclusion on the balance of probabilities 37 this was agreed at the hearing -- 11 of 15 -- 12 (p) On 9 September 2013 the body corporate made a complaint to the Commission. Several inspections, meetings and reports followed. The builder did some remedial work. (q) On 3 November 2014 the Commission indicated that a decision had been made not to direct rectification of the walling system.38 (r) On 27 February 2015 the Supreme Court proceedings referred to in paragraph [24] above were commenced by the body corporate and by a number of unit owners. (s) On 12 June 2015 the Commission issued a direction to rectify many matters but excluded any item of complaint relating to the walling system. The reason given was that it would have been unfair to the builder to make that direction. The six types of complaint in Table 1 [40] Returning to the types of complaints set out in the table, the first type is of complaints about the failure of the walling system itself or the coating of the walling system which in many areas had cracked, bulged and delaminated because of that failure. [41] It was argued at the hearing that Jadecorp ought to replace the walling system because other defects for which it was responsible had caused water to penetrate the building in various ways. Some of those ways are described in the list of type 2 defects in the table, but also it was said that there had been water ingress caused by other defective work. [42] One of the events of water ingress was in a storm in October 2010 which affected the penthouse. The roof was made watertight after this event. Bearing in mind the cracking, bulging, delamination and corrosion problems are all over the building it is very unlikely that the water penetration of the penthouse in 2010 is the cause of these problems. [43] Then there is the failure to fit 90° PVC angle setting bead on the external corners of the building. There is no doubt that these were not installed by the builder, and this was as a defect as reported by the Commission’s inspector Mr Howarth39. [44] It is said on behalf of the body corporate that water must have entered the building because of the absence of the setting bead. Mr Noble’s evidence however, is that the area in these corners is solid. He did not see any evidence of actual water penetration in the building due to the absence of setting bead although he did recognise that it could have happened. [45] There are indications which tend to support the view that there was no significant water ingress in these corners. The absence of setting bead on the external corners of the building was not referred to at all by Mr Nicholls when he investigated water penetration into the penthouse in October 2010, and only in passing by Mr Van De Hoef in his report of 10 October 2013.40 It is not a specific complaint in Mr Groom’s list. If the absence of setting 38 page 1454 39 page 1375 40 fourth paragraph on page 15 -- 12 of 15 -- 13 bead could have contributed to the dampness problems in the building it would be very surprising that it was not mentioned by any of these experts. [46] The body corporate rely on other defects for which Jadecorp were said to be responsible as causing water ingress. The best evidence about this is the report of Mr Van De Hoef which was prepared for the body corporate in 2013. Mr Van De Hoef identified three possible causes of water penetration: unprotected vents in the external wall, lack of flashing over some parapet walls and the absence of corner beading (referred to above). He opined that:- such defects are still relatively minor compared with the significant problem that currently exists on the subject site that relates directly to the corrosion of metal building components of the building41 [47] He reached this conclusion because of the nature and extent of the deterioration of the metal components, which were corroding wherever they were in contact with the walling system of the building42 and the speed with which the deterioration had occurred43. [48] The fact is that the boards used in the walling system were highly hygroscopic, and this meant that they had attracted moisture from the atmosphere44 and this had happened despite the properly applied coatings to the exterior and interior walls. The resulting cracking, bulging and delamination of the boards would then have permitted further water ingress.45 [49] The view I have reached therefore is that I cannot agree with the third main argument put forward by the body corporate that the true culprit for the problems in the building was the failure of the builder properly to seal and waterproof the building. [50] As for the remedial work which would be needed to deal with the defective walling system, I am told that there is a scope of work available showing the extent of the remedial work required, however this was not before me. The work required does not appear clearly from the expert evidence. However, it does appear from the amended Statement of Claim.46 The work is described as removing boards and applying chloride extraction or repair to both internal and external walls. The cost of this work is put as about $6m plus there is an additional $9.4m for enabling works. After contingencies, design and preparatory work, the total cost of the remedial work is pleaded as $16.86m. [51] It is clear that all the type 1 defects in the table would need to be rectified in this way. There is no patch repair available because unless the walling system panels are dealt with robustly, the deterioration in the building would 41 fourth paragraph on page 15 42 second paragraph on page 7 43 bottom of page 14 44 it was agreed at the hearing, and indeed part of the body corporate’s case that this was so; it is also confirmed in the Core Consultancy supplementary report in paragraph 3 45 Mr Noble’s affidavit paragraph 17.14 46 paragraph 24 -- 13 of 15 -- 14 continue. The question I have to decide is whether, in the circumstances, it would be fair to Jadecorp to direct that it rectifies these type 1 defects. [52] This must be considered in the light of the fact that the problems with the walling system which later emerged could not have been foreseen by a reasonably competent builder at the time of the construction work, and that there is no complaint about the external coating. There are complaints about certain things which may have allowed some water penetration but these were minor matters compared with the major issue of the walling system. The walling system was one in common use. Jadecorp was contractually entitled to use it. Whilst it is possible that Jadecorp may be contractually responsible for the defect in the materials, in these circumstances it would clearly be unfair to Jadecorp to direct that it rectify the type 1 defects. [53] I turn now to the specific type 2 defects in the table. [54] As for the unprotected extractor vents, although this is clearly a defect, on inspection Mr Noble could see no evidence of water penetration actually arising from this. Therefore he concluded that this was a category 2 defect. There is nothing to contradict these views. It follows that if I were to direct Jadecorp to rectify this defect this would be requiring remedy of a category 2 defect complained of outside the time contemplated by the defects policy, and this is something that I would need to take into account. It would also be directing work which will ultimately be pointless bearing in mind the significant work which is required to the substrate walling system. In the absence of evidence of actual water penetration requiring immediate work, it is not reasonable to direct that this work be done. [55] As for the opening of the joint between the building and the Pad Mount enclosure and also water entering under the door to level 9 foyer, Mr Noble is of the view that both these problems are the result of the failure of the substrate walling system. There is nothing to contradict this. In the circumstances, it would be unfair to direct Jadecorp to rectify these problems. [56] Type 3 defects in the table are those which arise from the early deterioration of metalwork attached to, or embedded in, the walling system. There was some evidence given at the hearing about the spitters on the balcony which were showing early deterioration. One difficulty with this defect is that it appears to be a category 2 defect and therefore if I directed remedial work it would be outside the time contemplated by the defects policy. [57] It was suggested that the spitters were deteriorating because of poor waterproofing. However the Vinsi partnership report states that these are deteriorating where they are “in contact” with magnesium oxide board. [58] Mr Noble was clear that the problem with the spitters and with all the metal attachments in this category of defect is the substrate walling system. I accept this. To remedy these defects properly would require removal and reinstatement of the walling system with which they are in contact. In the circumstances and for the reasons given above it would be unfair to Jadecorp to direct that it does that. -- 14 of 15 -- 15 [59] It would not be reasonable to direct that Jadecorp replace any of the metal attachments which have deteriorated without any work to the substrate, because this would only be a temporary solution. [60] Turning to the type 4 defects in the table, these are ones which have been rectified, at least on a temporary basis47, by other contractors. In the circumstances, it is inappropriate to direct their rectification by Jadecorp. [61] The type 5 complaints are ones which Mr Noble found not to be defective at the time of his inspection. There was no evidence to contradict what Mr Noble says about these, so it would be inappropriate to direct Jadecorp to rectify these items, in the circumstances. [62] In the circumstances I confirm the decision of the Commission made on 12 June 2015. 47 that is to say, the underlying substrate (the defective formwork) might have to be replaced at some time in the future -- 15 of 15 --