In a directions hearing on Friday, NSW Supreme Court Justice Rowan Darke said there was a “degree of urgency” to the owners’ application to sell the building and ordered the opposing lot owners and creditors to file their responses within four weeks. 

In the hearing, Justice Darke named all opposing owners, creditors and interested parties as defendants to the proceeding.

“It is a parlous situation facing the owners corporation and the lot owners and no doubt it is a very difficult situation for all the defendants as well, although to a lesser degree,” the judge said. 

“It does seem to me…there is potential scope for orders to be tailored to satisfactorily deal with the parties’ interests to a degree.

“There may be some irreconcilable differences but a discussion about the form of orders will crystallise the real issues.”

Barrister for the owners corporation Michelle Castle said that many of the property owners were in “financial difficulty” and needed the bid for sale to move quickly.

Mascot Towers completed construction in July 2008 and comprises 141 residential and retail properties, in two ten-storey buildings in Sydney’s south-east. Owners paid in excess of $900,000 for some apartments.

In April 2019, significant structural cracks were noticed in Mascot Towers’ transfer beams and Fire and Rescue NSW ordered an evacuation of all residents. 

New structural cracks and worsening of existing cracks were noticed in June 2019 after which the owners corporation engaged engineers to assess the building and remedial builders SBM to start rectification works. 

The owners corporation engaged law firm Mills Oakey in October 2019 to bring proceedings against ALAND Developments, a developer for a building next to Mascot Towers, “Peak Towers”, claiming that its construction had caused the ground underneath the building to become unstable and resulted in the cracking.

Mascot Towers builder J & B Elias Pty Ltd went into liquidation after allegedly striking a deal with lot owners in 2015 to pay $750,000 in exchange for a waiver of legal responsibility.

During expert assessments of the buildings for the Peak Towers proceedings, the owners learned of additional defects in the original construction of Mascot Towers. 

In March 2020, the owners learned of cracking in the decorative brick facade of Mascot Towers and subsequent investigations showed the facade may not have been properly tied to the building structure. Two months later the owners started emergency works to secure the facade and the strata committee met to discuss a collective sale of the apartments and retail properties.

As at May 2021, the funds to complete rectification work were estimated at $38.5 million, with $16 million already spent. If sold, Mascot Towers is expected to be worth $40 to $42.5 million, according to the Sydney Morning Herald.

On Friday, counsel for a creditor of the owners corporation, Lannock Capital 2, Jennifer Mee, said her client was opposing the owners’ bid for sale because the price sought would not be “adequate” for Lannock as an unsecured creditor. 

“There is some concern whether pricing under part 9 [Strata Schemes Development Act 2015] rather than part 10 is the appropriate course…my client’s ultimate interest is to be paid out,” said Mee.

Part 10 of the Act provides for a collective sale or redevelopment of a building by a number of steps including electing a committee, creating a strata renewal plan and seeking approval by the Land and Environment Court.

Apartment owner Anthony Stevens also opposed the owners corporation’s bid to sell the property without scoping out interest from other buyers, with his lawyer Thomas Waugh saying there was a concern about the suggested valuation.

The Commonwealth Bank of Australia, as a mortgagee for many of the owners, was not opposing the sale but wanted to be heard on how the proceeds were distributed, said the bank’s in-house counsel, Richard Lewin.

Lawyer for the owner of an IGA supermarket leasing a lot in the building, Peter Harkin, said the shop owner’s position on whether to oppose the sale was “in flux”.

Sydney has been home to other allegedly defective apartment developments, with Corrs Chambers Westgarth leading a class action filed in July 2019 against the state government-owned Sydney Olympic Park Authority and builder Icon Co after cracks appeared in Opal Tower on Christmas Eve 2018, forcing residents to evacuate. SOPA is responsible for managing the Olympic Park precinct where Opal Tower is located.

The owner’s corporation opted out of the class action in July last year after pursuing individual claims against SOPA and builder Icon. In February 2019, Developer Australia Avenue Developments and its parent company Ecove also filed individual proceedings against Icon over the Opal Tower incident.

The owners corporation declined to comment. Lawyerly has contacted lawyers for Lannock Capital 2, Stevens, CBA and the owner of the IGA supermarket, Can of Worms Pty Ltd.

The owners corporation is represented by Michelle Castle, instructed by SLF Lawyers. Lannock Capital 2 Pty Ltd is represented by Jennifer Mee. Anthony Stevens is represented by Kerim Benson Lawyers. CBA is represented by in-house counsel. Can of Worms Pty Ltd is represented by Colin Biggers & Paisley.

The case is THE OWNERS- STRATA PLAN NO. 80877 v .

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