Building Defects - an interesting case

Inger Brettle

On 18 June, the High Court in Canberra heard a final appeal regarding a Building Defects claim between builder Brookfield and the owners of a NSW Strata Plan, being only the second matter involving an owners corporation which has ever been heard before the High Court. 

Our partners at Grace Lawyers, authors of this text, are acting on behalf of the owners.

Before you think "legal speak - boring!" bare with us and read the following as it may potentially affect you:

In the defects claim the builder effectively claimed that an owners corporation cannot make a claim for negligence against the original 
builder as the builder did not owe the Owners Corporation a “Duty of Care.” The Supreme Court also found that there was no ability for an owners corporation to sue for negligence when all the rights and obligations of the parties were set out in the building contract. 

Hang in there, you are doing well, keep reading!

If this decision were allowed to stand, it would be extremely detrimental to the rights of owners corporations, possibly the scheme would have no remedy at all against the builder or the developer for defective building works leaving lot owners to foot the entire bill for remedial work to repair any construction defects. 

At this stage, we have either lost you completely, or we really got your attention! You may wonder what this means for Owners Corporations?

Currently the law in New South Wales is that a separate duty of care is owed by a builder to an owners corporation as successor in title, concurrently with any contractual duties between the parties. However, this could change upon determination of this High Court appeal. 

Given the uncertainty in the law in this area particularly in relation to any possible claim for building and construction defects, it would be prudent for any owners corporation to continue to take steps to preserve any possible rights they may have (ie for an action in negligence) until the outcome of the High Court appeal is fully known. 

We will post an update to this important case in the near future.

(Disclaimer: we know strata very well, but we are not strata lawyers. Please seek professional advice, which we are happy to organise for you!)