Can someone explaing what is going on here and how easy it is to fix please?

I am a total newbie to this forum and relative newbie DIY in general so apologies in advance for any blunders in this post.

I noticed a bulge at the top of one of my walls where it meets the ceiling. To hold my hands up I first noticed this issue about a year ago and did nothing about it. I know, I am an idiot. I recently spotted some damp spots on the celing in the same room (not at the same location) so went up to the attic to investigate. I found there was water coming in where the damp spots were, so that solved that. I also noticed that there was water trickling down the shared wall that corresponded to the location of the bulge. I got a roofer in who has fixed these issues (replaced tiles, replaced felt and replaced/repaired flashings). After he fixed it I thought I better take alook at this bulge, so I gave it a pull and the plaster has ripped out easily from the top to the bottom of of the wall. Now where this happens corresponds with where my block of flats joins onto the next. The flats are staggered (see diagram below, top down view).

I am kinda confused as to what the setup is here and whether it is and easy fix that I can do or whether I need a pro. What is confusing me is that there is a piece of what looks like plywood/chipboard sandwiched in the wall, running perpendicular to it (see next crude diagram below).

Due to the water damage, this has expanded (which I guess is what has caused the bulge) and in some places seems to have disintergrated completely, at least at the edge where I can see.

I have included a couple of photos of the crack. Photos take from inside the room

What is the purpose of this chipboard? Will it need replaced? Is that a big job?

Thanks in advance

** amended first diagram to show angle photos were taken and added a full size picture of crack. **