Leaky Buildings and Toxic Mould

19 Jul 2023
Leaky Buildings and Toxic Mould
Leaky Buildings and Toxic Mould

Litigation over leaky buildings is now perhaps aspect of building litigation in Australia, particularly within the context of especially heightened concerns regarding flammable cladding and structural defects which have frequented national media over the last years. Nonetheless, be it leaky balconies, leaky planter boxes or leaks emanating from common property, the outcome does not bode well, particularly for occupants. A failure in the design and/or construction of the exterior of a house (e.g: water tightness) has the potential to be just as disastrous as a failure in fire suppression systems or structural building components.

Water invasiveness has little respect for the integrity of an as-built product. Water damage corrupts most construction elements, regardless of whether it is wood, joinery, electrical interface or fabric. If it impacts upon the integrity of joinery or balconies, key elements of the building can fail. Rust on external balconies or concrete flaking can culminate in balcony collapse, which, needless to say, poses a public danger.

Leaky building claims are very costly as water damage and water penetration can be very destructive and difficult to fix. It is so often incredibly difficult to identify the specific source and the remedy, hence the exorbitant costs of both rectification and litigation.

Labyrinthine Body Corporate Litigation

There is unfortunately a proliferation of cases where extensive water penetration is adversely affecting multi-unit apartment blocks. Ordinarily, this involves the intervention of bodies corporate, as water malaise cases tend to be of both a common property and individual unit title derivation. This leads to very complex and labyrinthine litigation as the body corporate invariably has to ‘hunt in packs’, as it were, with a cluster of unit holders.

The Law of Nuisance and the Concern for Apartment Owners

Equally problematic in the multi-unit setting is the application of the law of private nuisance. Private nuisance is an interesting tort that involves unreasonable and substantial interference with           one’s land or the enjoyment of one’s land, where that interference emanates from another’s land.[1] It can be seen from this general outline of private nuisance why leaks impacting on other properties often give rise to private nuisance claims.

Regardless of whether the cause of water ingress migration is of the defective workmanship or burst pipe derivation, if water migrates from one apartment to another, then the owner of the source apartment can be found liable for causing and alternatively not arresting the nuisance. Hence, if you own an apartment and you have a burst pipe, and water seeps into the apartment below or next-door causing damage, then you will likely be liable for the damages that flow from that nuisance.

Where can builders face liability?

  • Rainwater buildup around building foundations resulting from the ground sloping towards the house. This required additional landscaping and drainage installation to channel water away from the home.
  • Inadequate ventilation which leads to condensation buildup.
  • Exposure of the frame of the house to the elements for too long. When the final “envelope” of the house is completed, moisture can be trapped within the watertight exterior.
  • General leaks caused by improper building work.

As with other Australian states, homeowners benefit from the protections of statutory warranties under the Domestic Building Contracts Act. These protections require builders and tradespeople to deliver good workmanship, use high-quality materials which are fit for purpose, complete works in contracted timeframes and use reasonable care and skill and build according to plans and specifications.

While these guarantees seem logical, covid has brought pressures upon the industry in a way most have never experienced before. This means that the difficulties in acquiring materials from overseas, time and budget pressures and the difficulties in finding qualified subcontractors has had the knock-on effect of threatening the viability of many building companies. Fixed price contracts entered into before covid began has meant that builders have had to complete projects to the specifications quoted while under new and unanticipated pressures. It is not out of the imagination to say that water ingress and mould issues could arise in the next few years due to covid’s affects on time allocations to projects and a lack of qualified tradespeople resulting in insufficient waterproofing.

Apart from statutory warranties, homeowners may also have claims under a ‘Water Act Liability’ against anyone who contributes or causes unreasonable excess water flow from one property to another. Damages can relate to financial loss or damage, property damage, or ‘injury to any other person’; the latter could potentially include health impacts of mould caused by neighbour excess water flow.

How prevalent is the issue?

As water ingress is hard to detect and the symptoms might not show for years, it is hard to say. However, research conducted by the Strata Community Association of NSW has found that nearly four out of 10 new apartments have serious defects. A NSW parliamentary enquiry has confirmed that building defects are widespread. This has been due to the rapid expansion in the numbers of apartments being built [2].

An ABC enquiry has found that black mould has been found in apartment blocks, in what experts describe as an “absolute catastrophe”. Under the Victorian cladding rectification regime the extent of the problem has emerged. The scheme was setup to remove certain classes of combustible cladding considered a fire threat, however the scheme does not cover mould damage. The costs then to rectify the mould issues may well exceed the value of the property. [3]

The Dangers of Toxic Mould

The most sinister aspect of water damage cases, however, is not the immense cost regarding diagnosis and protracted litigation; it is the potential for there to be an environment that is conducive to the growth and proliferation of toxic mould. Illness that emanates from toxic mould can be life-threatening and can even take a case into the public liability realm.

In 2004, the Institute of Medicine (IOM) found there was sufficient evidence to link indoor exposure to mould with upper respiratory tract symptoms, cough and wheeze in otherwise healthy people; with asthma symptoms in people with asthma; and with hypersensitivity pneumonitis in individuals susceptible to that immune-mediated condition. The IOM also found limited or suggestive evidence linking indoor mould exposure and respiratory illness in otherwise healthy children.

Types and cause of toxic mould

Mould, according to the Centres for Disease Control and Prevention, has a tendency to proliferate in warm, damp, humid conditions. Needless to say, water damaged environments, regardless of whether they are residential abodes or commercial or civil buildings, can create an environment conducive to the growth and spread of mould. More ominous is the circulation of airborne spores, particularly in air-conditioned environments, where the air conditioning systems abet the airborne circulation and transportation of spores in an internal environment.

The most common types of mould are:

  • Cladosporium
  • Penicillium
  • Alternaria
  • Aspergillus

Types of illnesses that can emanate from toxic mould include:

  • Eye irritation
  • Skin irritation
  • Fever
  • Shortness of breath
  • Chronic lung disease
  • Obstructive lung disease
  • Hay fever
  • Chronic obstructive pulmonary disorder

Toxic Mould Litigation and Personal Injury

There has been some litigation, particularly in the US, in circumstances where plaintiffs have contracted serious lung conditions due to toxic mould. With regard to Australia, there do not seem to be many reported cases, but this is probably due to the fact that many cases that are initiated for illnesses that emanate from toxic mould are conceivably settled before trial, hence, the dearth of local precedents.

An American toxic mould case, which included personal injury claims, that ran to conclusion was Mazza v Schurtz No. 00A S04795 (Sacramento County, Cal. Super. Ct.).

This case was decided by a jury, and the plaintiffs, Darren and Marcie Mazza, were successful in receiving an award for damages of $2.7 million. A decision was handed down in November, 2001.

The respondents were owners and managers of apartments. It was alleged by the plaintiffs that the respondents failed to act upon complaints with respect to water penetration and mould growth in the plaintiffs’ abode. Readings taken of the atmospheric toxicity established that there were problematic levels of stachybotrys, aspergillus and penicillium. The plaintiffs gave evidence that both themselves and their child had been compelled to attend hospital on a number of occasions on account of the mould induced toxicity.

There were a number of elements to the plaintiffs’ case which comprised negligence culminating in personal injury, contractual and warranty breach, nuisance, emotional distress (or mental harm), and eviction. The plaintiffs were successful.

Another pertinent case, albeit one that did not run to conclusion, is that relating to an American celebrity, one Ed McMahon.

In May, 2003, the Los Angeles Times reported that respondent insurers settled a case in circumstances where Ed McMahon initiated legal proceedings for toxic mould-induced sickness for the amount of $7.2 million.

McMahon and his spouse alleged that they contracted deleterious respiratory complaints on account of a toxic mould manifestation, as did their dog. The manifestation originated from a burst pipe and the LA Times reported that the contagion spread through the air conditioning system into closets contaminating, amongst other things, their clothes.

Toxic mould litigation does occur in the antipodes. Indeed, we are aware of cases where property occupiers have had to vacate abodes on account of the presence of toxic mould.

In one instance, a landlord was in the invidious position of not being able to rent her property out on account of what were considered to be unhealthy spore level readings. The landlord granted approval for their tenant to vacate the premises in light of their regard for the tenant’s future well-being.

An Australian first unfolded in Townsville in 2009, when an employee lodged a workcover claim against her employer for health implications which she claims were the result of fungal genera; toxic mould. A report allegedly found bacteria in her work office at nine times higher than normal. [4]

There is an emerging new paradigm in Australia, one where more and more leaky buildings are coming to the fore. There are many issues to consider when grappling with a leaky building regardless of whether the context is the home setting, a workplace setting or a multi-unit development setting. The questions of which actors are responsible, which insurance policies respond and the issue of how a leaky building environment will ‘gestate’ are all challenging issues. In concluding this piece, the writer has formulated some pointers on how to progress the resolution of a ‘leaky.’

What to do if One is Beset with a Leaky Building

  • Act with alacrity; if you are insured, contact your broker to check to see whether the insurance policy responds. If in doubt, see a lawyer at the earliest opportunity and have the policy explained to you.
  • Regardless, act fast to ensure that remedial measures are brought to bear to arrest the problem as much as possible. If you are in a multi-unit development, remember the law of nuisance – you need to endeavour to ensure that the water flow does not migrate to neighbouring properties.
  • Get an appropriately qualified water damage expert into do a report post-haste. Then give the report to your insurer or your solicitor.
  • Ensure that there is an assessment of mould spore count; ensure that the abode is safe to live in. Further, before you settle any claim where there has been a mould manifestation, get a sign-off from an expert on mould pathology to verify that the mould and any toxic elements have been comprehensively and conclusively eradicated. This is critical.
  • In circumstances where those responsible for the defective dynamic that culminated in a water damage paradigm refuse to come to the party and rectify the defect, bite the bullet and engage a reputable construction law firm.
  • Finally, do not accept a solution that fails to totally fix the problem. There are no Band-Aid quick fixes for leaky buildings. Close enough is not good enough, so do not be hoodwinked into a less-than-complete solution. Alas, such resolve will take time and will require fortitude and extraordinary patience but in the long run it’s the only way to go.

To see more please read article: 

Common vs Private Property Defects in Owners Corporation Buildings

This is a Lovegrove and Cotton article.


This article is not legal advice and discusses it’s topic in only general terms. Should you be in need of legal advice, please contact a construction law firm. The experienced team at Lovegrove & Cotton can help property owners and building practitioners resolve any type of building dispute.

Additional Assistance provided by Cameron Wade, paralegal at Lovegrove and Cotton. 


[1] See eg: Coventry (t/as RDC Promotions) v Lawrence [2014] AC 822.

[2] Leith van Onselen, ‘Thousands of Apartments “have serious defects” Macrobusiness (Information article, 30/11/2022) <https://www.macrobusiness.com.au/2022/11/thousands-of-apartments-have-serious-defects/.

[3] Laura Mayers, Charlotte King & Andy Burns, ‘Defect-Riddled Apartments Covered in Mould Could be Write-offs as Rapair Costs Mount’ ABC News (News Article, 29/11/2022) < https://www.abc.net.au/news/2022-11-29/mould-in-apartments-leads-to-huge-damage-bills/101692710>.

[4] Christine Kellett, ‘Worker Sues boss Over ‘Toxic Mould’ In Office’ Brisbane Times (Newspaper Article, 7/7/2009) <https://www.brisbanetimes.com.au/national/queensland/worker-sues-boss-over-toxic-mould-in-office-20090707-darl.html.