High Court refuses Strata Building Defects Negligence Claims
Brookfield Multiplex Ltd v. Owners Corporation Strata Plan 61288 & Anor [2014] HCA 36
Quick Read
This High Court decision is about the legal obligations of the builder of the serviced apartment strata complex The Chelsea at Chatswood to the strata corporation to ensure there were no latent [hidden] defects that were structural, created dangers or made apartments uninhabitable. The primary issue was whether there was a duty under negligence law to exercise reasonable care in the construction of the building to avoid causing pure economic loss resulting from the defects in the common property. A secondary issue was whether there might be a separate duty in negligence owed to the developer rather than the strata corporation. After detailed consideration of negligence law and its application to this particular building, the High Court decided that because of the semi-commercial character of the development [for investor owners], there was no obligations under negligence principles. This is an extremely important strata decision as it was made by the High Court [so binds all other Australian Courts and Tribunals], excludes most building defect claims under negligence principles, but leaves open a slim possibility of a successful claim in different circumstances.
Implications
Damages for the cost of fixing building defects are pure economic loss rather than loss for physical damage.
A builder’s duty of care for economic loss [defects] is therefore more limited.
The building contract primarily defines what builders and owners agree about risk allocation for construction.
A builder’s duty of care to the developer doesn’t necessarily transfer to the strata corporation as the next owner unless it is vulnerable.
This court decision is an appeal to the High Court, the highest Court in Australia after the dispute was decided by the NSW Court of Appeal.
The dispute involved The Chelsea in Chatswood, a strata title serviced apartment complex that was built by Brookfield. After the strata building was completed and strata lots were sold, latent defects in the common property emerged and the strata building claimed damages for the costs of rectifying the defects.
The defects included faults in lintels and windows, external facade render, fire services shutters, and spa pool leaks.
The key details of the dispute were.
Brookfield built the strata building under a design and construct building contract made with the developer.
The strata title corporation was created for the part of the building used for serviced apartments as originally intended and became the owner of the common property structures.
The strata title corporation is the manager of the strata building and as agent for the owners of the serviced apartments.
The design and construct contract contained detailed provisions about the quality of Brookfield’s work including a requirement that Brookfield remedy defects or omissions in the construction work within a limited defects liability period.
The standard sale contract for the serviced apartment strata lots, attached the design and construct contract, gave each buyer specific rights about defects in the building covering the lots and the common property.
Latent defects emerged in the strata building including to lintels and windows, external facade render, fire services shutters, and the spa pool.
Because the time limits under building consumer protection laws had expired, the strata building could not make claims for breaches of warranties in those laws about quality, compliance, and suitability.
So, the strata building started legal action against Brookfield under negligence principles.
The strata building argued that it was entitled to damages for the cost of repairing the defects in negligence because Brookfield had a duty to take reasonable care to avoid the reasonably foreseeable costs of having to make good any consequences of latent defects caused by the building's defective design and/or construction.
Full Report & Case Details
Keywords
#Australia #HighCourt #2014 #defects #negligence #builder #contracts