David Andrews
22 December 2015

Case Law Update: Is an owners corporation owed a duty of care in a claim in negligence against a builder?

David Andrews


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Building and Construction

Corporate and Commercial

Dispute Resolution


The Supreme Court in The Owners Strata Plan No. 74602 v Brookfield Australia Investments Limited [2015] NSWSC 1916 has once again considered the question of whether an owners corporation is owed a duty of care in a claim in negligence against a builder. 

The Supreme Court recently considered the question as to whether a successor in title of a dwelling house was owed a duty of care in the decision of Chan v Acres.  In that case, the Supreme Court found that a home owner of a dwelling was owed a duty of care by a certifier. 

In SP74602, the Supreme Court has found that the owners corporation was not owed a duty of care by the builder.  Referring to the decision of the High Court in Brookfield Multiplex Limited v Owners Strata Plan No. 61288 [2014] HCA 36, the Court found that the existence of the statutory warranties under the Home Building Act 1989, which were available to the owners corporation, was a basis for denying the existence of a duty of care being owed by the builder to the owners corporation.  In the words of Stevenson J, the existence of the statutory warranties “… points strongly to the conclusion that the owners corporation is not vulnerable in the relevant sense“. 

Regrettably, this feature of the decision is a disappointing outcome for owners corporations in pursuing compensation for defective building work from builders.  We noted in previous case reviews that, following the decision in the High Court in Brookfield, it was evident that there would be difficulties and significant hurdles for owners corporations making claims based upon negligence.  The decision in SP74602 seems to suggest that those difficulties and obstacles are almost insurmountable.

The inability of owners corporations to make a claim in negligence undermines consumer protection for those who live in strata. The NSW Government needs to urgently legislate to clarify this area of law.

The decision in SP74602 raises other significant issues for owners corporations bringing claims for defects for a breach of the statutory warranties, particularly in respect of the nature and extent of the evidence which is required in respect of systemic defect claims.  We will provide our detailed analysis of the decision and the consequences for owners corporations shortly.

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