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Application of proportionate liability to the statutory warranties


The proportionate liability provisions in Part 4 of the Civil Liability Act 2002 (“CLA”) apply to claims for breach of statutory warranty under the Home Building Act 1989 (“HBA”), according to the recent decision of the Supreme Court in Owners Corporation SP 72357 v Dasco Constructions Pty Limited & Ors [2010] NSWSC 819 (Unreported, Einstein J, 27 July 2010) (“Dasco”).

The decision has potentially wide-reaching impacts on the rights of owners corporations to sue builders and developers under the HBA, and may affect both new and existing proceedings.

What is proportionate liability?

The proportionate liability regime introduced by the CLA deals with the manner in which liability is apportioned where damage was caused by a number of “concurrent wrongdoers”. The provisions may apply to certain proceedings commenced on or after 1 December 2004 (subject to certain exceptions).

In a claim for breach of statutory warranty, potential “concurrent wrongdoers” include the builder, developer, designers, certifiers, Council, supervisors, sub-contractors and others.

The position before the CLA applied Before the introduction of the proportionate liability regime, where a number of wrongdoers were liable for the same damage, a plaintiff could sue any one of those wrongdoers for the whole amount of its loss (subject to the limits of its cause of action and any defences available). This approach effectively left it to the defendant and any other “wrongdoers” to apportion liability between themselves (for example, by way of bringing cross-claims against each other).

The position under the CLA In contrast, under the proportionate liability regime, the plaintiff is only able to recover from a defendant to the extent that the Court considers “just” having regard to the extent of that defendant’s responsibility for the damage—regardless of whether all the relevant wrongdoers are defendants in the proceedings (or even whether they could be joined to those proceedings at all).

Accordingly, a plaintiff may find itself unable to recover for substantial proportions of its damage, as the “concurrent wrongdoers” with the greatest share of the liability may be unable to be pursued. This could be because they are bankrupt, in liquidation, dead, or disappeared, because a relevant limitation period has expired, or because of limitations on the jurisdiction in which the claim was originally brought.

Alternatively, to maximise its ability to recover, a plaintiff may be forced to run complex and expensive proceedings against multiple defendants on multiple causes of action (and perhaps in multiple jurisdictions).

Key points

Builders and developers may seek to reduce their liability under the statutory warranties by alleging that parties such as designers, certifiers, Council, supervisors, sub-contractors and others were “concurrent wrongdoers”.

Strata schemes may be unable to pursue those “concurrent wrongdoers” due to factors such as insolvency or expiry of time limits. If those other parties can be pursued it may be complex and costly.

Some proceedings may need to be transferred to other forums due to jurisdictional issues (for example, the Consumer, Trader and Tenancy Tribunal may not have jurisdiction to hear certain types of claims against some “concurrent wrongdoers”).

Claims by strata schemes against developers may be particularly affected, as it is expected that Courts will consider the builder or others to have the largest share of liability.

This area of law is still developing and more authorities are expected. We are aware of other proceedings in which the authority of Dasco may be challenged. We note also that the issues may be addressed by legislative change.

Thanks to Mills Oakley Lawyers for supplying this article

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