On 10 October 2012 Justice McDougall of the NSW Supreme Court handed down another decision making life difficult for apartment buildings with defects.
The decision, Owners Corporation Strata Plan 61288 v Brookfield Multiplex  NSWSC 1219 (which followed on from Justice McDougall’s earlier decision in Owners Corporation Strata Plan 72535 v Brookfield Multiplex  NSWSC 712 handed down on 29 June 2012) will have a significant impact on owners corporations which suffer from building defects.
A key feature of the first decision of Justice McDougall (in June 2012) was that the owners corporation had the benefit of the statutory warranties under the Home Building Act and that it was therefore not appropriate for the court to impose some further or more onerous duty of care.
Further, it was pointed out the developer could take action against the builder for any building defects arising in the property and there was no need to extend any rights to owners corporations in circumstances where developers had such rights which could easily be exercised by those developers against the builder.
This later decision was slightly different in that it involved:
1. A serviced apartment development in Chatswood which was not covered by the Home Building Act and therefore could not rely upon the statutory warranties provided by the Home Building Act; and
2. Many of the defects were latent in nature and therefore could not have been known by the developer. That is, the developer could not have acted against the builder as it could not have been aware of the existence of the defects.
Justice McDougall indicated that the fact that the owners corporation could not rely upon the statutory warranties under the Home Building Act to sue the builder would not prevent him from finding that the builder (Brookfield Multiplex) did not owe the owners corporation a duty of care when constructing the building. Nor would the fact that the existence of many of the defects could only have been known after the developer had disposed of the units.
This decision therefore has the following impact:
1. Owners corporations cannot sue builders in negligence; and
2. Consequently, owners corporations who do not have the benefit of statutory warranties under the Home Building Act will have no ability to sue builders for poor workmanship in completing building work.
Posted by Chris Kerin