I am well experienced in having to deal with this as the aggrieved downstairs neighbour where I used to live…
As such, I am sorry but I don’t have much sympathy for your predicament I’m afraid. I’ve been on the other end of your dilemma, and it is very unpleasant and costly to have property damaged due to an installation mistake or poor workmanship of an upstairs neighbour’s plumbing.
$960 seems very reasonable as payment for a tradesperson to come rectify the damage caused to your neighbour’s property. Your neighbour should get the OC to pay straightaway so as to relieve them of the damage and then they can get back to their lives, and it remains that the OC can then bill you for the additional on your levy notice.
Remember though it will cost you more than that – you will need to rectify the source problem without delay, at your own cost and to the satisfaction of the OC and/or the neighbour downstairs. Ideally you will have your works done prior to your neighbours so that the issue won’t exacerbate after they have had their repairs done.
Not sure about liability of whether you are liable or the OC in terms of NSW law and regulations. It seems reasonable to expect you are liable and the OC is correct in asking you to pay for the damage. But you also must repair the source as well and with urgency.
For those interested – here is my story of five years of putting up with an unreasonable upstairs neighbour and a leak that would not go away – https://www.flatchat.com.au/topic/bathroom-leak/#post-61282
Reply from Victoria. I’m not a lawyer, just experienced as a resident and committee mbr of many years.