Claims Meriton’s $100m Sydney mega development has $123m worth of defects

Meriton is facing an unprecedented $123 million claim over allegations of thousands of defects in one of its Sydney developments, in a high stakes court battle that the Australian construction giant has vowed to defend to the “bitter end”.

Any sizable payout in the case is likely to raise questions about Meriton’s top rating on a NSW register of trustworthy developers, which the former building commissioner promised would prevent buyers from ending up with a “lemon”.

The Meriton development at St Ives, which is the subject of the largest ever defects claim against the building giant. Credit: Nick Moir

The owners’ corporation of the development at St Ives has been buoyed by two recent NSW Supreme Court judgments in its favour, one of which allowed it to more than quadruple the size of its initial $25.6 million defects claim.

A Meriton spokesman told the Herald the development cost $100 million to build, less than the size of the defects claim against it.

“The notion that this building would cost more to rectify than it did to build [is] preposterous,” he said.

It was a point the company’s lawyers also raised during NSW Supreme Court proceedings in February, prompting Justice James Stevenson to remind them the development was constructed 12 years ago.

“If a building costs $100 million to build and it’s going to cost $120 million to fix, whose problem is that? Whose fault is that? It’s not the owners corporation’s,” Stevenson said.

Earlier in the hearing, Stevenson also noted: “This is a big case for everybody and obviously for Meriton, even for Meriton it is a big case.”

Meanwhile, Meriton has embarked on a letterbox campaign to owners, attacking their lawyers and railing against what it labelled a “ridiculous” defects claim.

Meriton’s managing director, Harry Triguboff, signed a series of letters that appeared in owners’ mailboxes over the past 12 months.

The billionaire told them in October that he had collected numerous awards in more than 60 years of building and developing.

Property developer Harry Triguboff has been on Australia’s rich list for decades.Credit: Arsineh Houspian

“Never, in all of that time, has any claim for anywhere near such an amount ever been made,” he wrote.

Triguboff warned the owners corporation the claim would devalue their properties and they would not recoup their costs, even if they won.

“The cost of these proceedings has already come out of your pockets and there is a lot more cost to be incurred.

“This case will run for years to come. My company will fight this claim to the bitter end if it has to.

“And even if the claim succeeds to the extent claimed, which it won’t, the work that is said to be needed will force you out of your homes for not less than 12 months (probably more).”

In another letter last June, Triguboff took aim at the owners corporation’s legal team.

“If your lawyers were so good, how have they succeeding in obtaining nothing for you? [sic],” he wrote.

One owner who spoke to the Herald on the condition of anonymity described receiving the letters as “deeply concerning”.

“As a major corporation, Meriton’s actions are unacceptable,” she said. “Homeowners must stand their ground and insist that all defects are properly rectified.”

At the centre of the saga is a Meriton development comprising 299 residential units across six buildings, finished in stages between 2012 and 2013.

A monastery remaining on the site is the only legacy of its humble beginnings, with real estate agents promoting the development as offering a “level of refined luxury rarely seen in apartments today”.

In August 2019, the building’s owners’ corporation took action in the NSW Supreme Court against a string of Meriton entities, including builders Karimbla Construction Services Pty Ltd and Karimbla Construction Services (NSW) Pty Ltd.

The owners alleged structural, fire safety, waterproofing, mechanical, hydraulic and other defects in the buildings.

In February this year, Justice Stevenson allowed the owners’ corporation to vastly increase the size of its initial $25.6 million defects claim to $123 million.

Early in the proceedings, the owners’ corporation had put forward a schedule of 5445 alleged defects and served its evidence based on inspections of a sample, but not all of, the units.

The owners’ corporation’s experts alleged that many of the defects were systemic and likely to be present across all the apartments.

In his judgment, Stevenson said this approach was taken because the owners’ corporation was “hoping in due course to achieve a compromise with the builder”.

The warring parties were locked in negotiations between December 2021 and March 2024, which Stevenson said showed “extensive and bona fide” efforts to resolve the dispute.

“I was told … during that time, the Builder performed some work to rectify some of the alleged defects,” he said.

Settlement negotiations broke down in March 2024.

”This has produced the unsatisfactory position of the Owners Corporation serving a further, very extensive, tranche of evidence; greatly expanding the value of its claim,” Stevenson said.

An updated schedule included 8000 rows of defects, though the parties agreed it would need to be revised due to omissions and duplications.

Stevenson said he did not encourage owners’ corporations to conduct litigation in that way, and the usual practice was to bring forward all evidence-in-chief at once, rather than having “a second bite at the cherry”.

However, Stevenson ruled there were special circumstances that justified allowing it in this case.

“If the defects are as extensive as the Owners Corporation’s evidence, not yet tested, suggests, this is a serious matter for the Builder as well as the Owners Corporation,” Stevenson said.

“But it would be a very hard thing to deny the Owners Corporation, and thus in effect its members, a chance to establish such a case.”

Meriton’s lawyers told the court it may have lost the opportunity to launch cross-claims against some of its subcontractors due to limitation issues.

Stevenson said there was no explanation as to why the builder did not take such steps earlier in the proceedings. However, he did order the owners’ corporation to pay Meriton’s costs for the motion.

In a separate judgment, Stevenson dismissed an application by the Meriton parties for an order that the owners’ corporation put up a $2,405,000 security for its costs.

There was no reason to believe the owners’ corporation could not pay the builder’s costs within a reasonable timeframe if ordered to do so, Stevenson ruled.

“It is unlikely that the Owners Corporation will altogether fail and no more than a matter of speculation that the Builder will in fact obtain an order that the Owners Corporation pay all of its costs,” Stevenson said, ordering Meriton to pay the owners’ corporation’s costs for the motion.

Meriton is due to serve its evidence by the end of May.

The law firm representing the owners’ corporation, Chambers Russell, said it was also unable to comment while the matter remained before the courts.

A Meriton spokesman said it would vehemently defend the proceedings and had previously invited the NSW Building Commission to inspect the units, as it remained confident the defects had been exaggerated.

“The building is fully occupied, a fact that is inconsistent with the allegations made by the Owner’s [sic] Corporation,” he said.

“The mere fact that units have come to be purchased in recent years in this development demonstrates that it is still a valued development in St Ives.”

The spokesman added that Meriton’s position was it would rectify legitimate defects, and it had already returned to the site to rectify agreed items.

“Meriton worked with the Strata Committee and its experts for years to finalise a list of agreed items but, unfortunately, the Owner’s Corporation voted against these works being carried out,” he said.

The secretary of the strata committee, Kristyn Haywood, said it was doing its very best to achieve a proper outcome for owners.

“Whilst we do not accept the statements made by Meriton, we don’t feel it appropriate to comment given the current proceedings before the Supreme Court,” she said.

In 2022, Meriton’s building arm, Karimbla Construction Services (NSW) Pty Ltd, received one of the top ratings on a statewide register designed to help prospective home buyers find trustworthy builders.

The Independent Construction Industry Rating Tool (iCIRT) was the brainchild of former NSW building commissioner David Chandler, and is independently managed by credit monitoring firm Equifax.

Former NSW building commissioner David Chandler. Credit: Steven Siewert

Businesses pay to receive a star rating based on their capability, capacity and commitment in delivering safe, compliant and trustworthy buildings.

The vast majority of defect disputes before the courts end in confidential settlements.

The Herald asked Equifax whether a hypothetical court settlement in the St Ives matter would factor into Karimbla’s rating.

An Equifax spokesperson said businesses listed on the iCIRT register were obligated to report any material events after receiving a rating, including new proceedings or confidential settlements.

She said this allowed Equifax to review and potentially revise its ratings.

“Failure to address material defects or honour obligations will lead to a review and likely removal from the iCIRT register,” the spokeswoman said.

The spokeswoman noted historical challenges regarding quality assurance but said significant improvements had been observed in recent years.

“Although older buildings may exhibit latent defects, iCIRT-rated businesses have demonstrated a commitment to rectifying and remediating material defects,” she said.

The Meriton spokesman said it was committed to its obligations to report all material matters to iCIRT.

“Meriton has one of the highest iCert [sic] ratings in Australia behind a long and proven track record as a developer and builder in Australia with numerous accolades and awards bestowed upon it each year including the HIA’s Australia’s Number One Apartment Builder of the Year (2024) and Urban Development Institute of Australia (NSW)’s Developer of the Year (2024).”

A spokesman for Building Commission NSW said it was aware of the legal action.

”Before beginning legal action, owners’ corporations and individuals who have identified defects at their properties are urged to contact Building Commission NSW for assistance,” he said.