A body corporate in a 22 story multi-use building has secured a Supreme Court declaration that the builder is liable to it for “latent defects in the common property” it constructed 15 years earlier.

Multiplex (now Brookfield Australia) built the part serviced offices, part residential premises in Railway Street Chatswood under a $55 million “design and construct” arrangement in 1998.

The serviced offices body corporate and the residential apartment body corporate both sued the builder seeking declarations that it was liable for structural defects and those “that constituted a danger to persons on the premises” or which made the apartments “uninhabitable”.

The New South Wales Court of Appeal, overturning a lower court decision, ruled that the builder owed a duty of care for losses of a “pure economic” nature, given the relationship of proximity between the “relevant class of act or omission and the relevant kind of damage”.

Brookfield’s defence that such an extension of liability was an unwarranted development of the common law in Australia, was rejected.

The duty of care should be held applicable in circumstances where negligent construction was established; the defects were undiscoverable earlier with the exercise of reasonable care; they were caused before the community titles plan was registered; and the loss was foreseeable.

That the building contract had been entered into the developer (the original owner) and not the body corporate, should not – so said the court – protect the builder from liability.

The court ruled that the builder should be accountable for the defects and a further trial will be held, if required, to determine the extent of that liability.

The Owners – Strata Plan No 61288 v Brookfield Australia Investments Ltd [2013] NSWCA 317 Basten JA Macfarlan JA Leeming JA 25/09/2013
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