Building Defects Claim Update – High Court Hands Down Decision in Brookfield Case

Posted 10 October 2014

Category: Building Defects

In a Nutshell

On 8 October 2014, the High Court in Brookfield Multiplex Ltd v Owners Corporation Strata Plan 61288 [2014] HCA 36 (“the Brookfield case”) found that a builder did not owe a duty of care to an owners corporation in a serviced apartment complex (not residential building works) where sophisticated parties had negotiated rectification clauses.

The High Court held that a duty of care continues to exist if the principles in Bryan v Maloney are satisfied.

The decision is not conclusive with respect to negligence claims for:

1. Residential building works;
2. Claims where the builder and developer are the same party; or
3. Claims against designers or certifiers.

Impact on Owners Corporations

This decision highlights the need for owners when negotiating contracts to purchase non-residential lots to carefully negotiate the terms of any defect rectification clauses in the common property.

Although this decision is not conclusive in respect of residential building works, owners will need to ensure that they:

1. Utilise the statutory warranties, including by:
   • Becoming aware of defects within the relevant periods and notifying the relevant insurers;
   • Before 1 December 2014–
     • Lodging insurance claims; and
     • Commencing Court or Tribunal proceedings (to avoid the sweeping adverse retrospective changes to the statutory warranties which are expected to commence on 1 December 2014, see links below); or
   • If unable to perform paragraph (b) above by 1 December 2014:
     • Making any insurance claims within the appropriate periods; and
     • Commencing Court or Tribunal proceedings within the statutory warranty periods; and
2. Take care when framing remedial works contracts to ensure that they have adequate contractual protections against builders where works are undertaken.

The decision does not remove other remedies available such as misleading and deceptive conduct.

***The information contained in this article is general information only and not legal advice. The currency, accuracy and completeness of this article (and its contents) should be checked by obtaining independent legal advice before you take any action or otherwise rely upon its contents in any way.