The Supreme Court of NSW has changed the landscape for building claims made under the Home Building Act
1989 (NSW) following the decision of Owners Corporation SP72357 v. Dasco Constructions Pty Limited & Ors handed down on 27 July 2010.
The Plaintiff, being the owners corporation, sued the builder and other parties for defective building work done in the construction of the building. The Plaintiff’s claim against the builder was based upon a breach of the statutory warranties under Part 2C of the Home Building Act, 1989 (NSW). The statutory warranties are implied into contracts to carry out residential building work, and amongst other things require the builder to do building work in a proper and workmanlike manner.
The Defendant, being the builder, defended the claim and relied in its defence upon proportionate liability
provisions in Part 4 of the Civil Liability Act, 2002 (NSW). Part 4 of this Act allows a Court to limit the liability of a defendant to an amount that reflects the proportion of damage or loss claimed which the Court considers just having regarding to the defendant’s responsibility for the damage or loss. For example, if an owners corporation claimed damages of $100,000 from a builder for defective building work, and the builder alleges another party (say a sub-contractor) was responsible for the loss and damage, the Court might only order the builder to pay a portion of the claim, regardless of whether the sub-contractor was a party to the proceedings or not. The Plaintiff sought to strike out this part of the defence before the hearing.
The Court noted that there was no previous direct authority on whether Part 4 applied to building claims based upon the statutory warranties. The Court considered the legislation, and confirmed that Part 4 of the Civil Liability Act, 2002 (NSW) applies to claims based upon a breach of the statutory warranties.
If an owners corporation has a current claim against a builder or developer for a breach of the statutory
warranties, the extent of damages which they may recover from the builder may be reduced if the Court decides to apportion liability. The extent of any reduction will not be known until the end of the proceedings, after the Court has heard all the evidence. Owners corporations who have commenced legal proceedings seeking compensation for defective building work must consider immediately and carefully whether any other party is responsible for the alleged defective building work. Owners Corporation who are about to commence legal proceedings must now consider whether parties other than the builder and developer should joined as a defendant.
The decision has serious ramifications for current and proposed building claims against builders and developers
based upon a breach of the statutory warranties. The decision is also likely to impact upon the assessment of
claims made on Home Owners Warranty insurance.