The Christmas Eve evacuation of the Opel Tower development in Sydney’s Olympic Park again calls into question the liability of developers, builders and consultants for building works which go beyond residential construction.
Andrew Musgrave
In Bryan v Maloney (1995) 182 CLR 609 the High Court held that the builder of a dwelling house owed a duty of care to a subsequent purchaser of the house, which could be breached by careless construction resulting in latent defects. Consequently, an action in negligence for economic loss was available to that subsequent purchaser.
After Bryan v Maloney many of the State governments sought to clarify and indeed strengthen the protection of purchasers of residential dwellings. This, at least in part, was a reaction to the problems associated with that decision and the difficulty in discerning any single coherent ratio decidendi from the various judgements. The case stands as a reminder that difficult cases often result in bad (or at least opaque) law.
Without wanting to draw an artificial distinction between species of construction work, where the paradigm shifts to commercial construction work the High Court resisted the temptation to broaden the circumstances in which a duty of case will be imposed on a builder or a consultant for economic loss sustained by a subsequent purchaser. In Woolcock Street Investments Pty Ltd v CDG Pty Ltd [2004] HCA 16 the High Court singled out the concept of vulnerability as the predominant determinant of whether a duty of care can be said to arise. “Vulnerability” in this context referred to the inability to protect oneself against the economic loss which it has suffered. In this case the subsequent purchaser could have included in the purchase contract warranties regarding the structural integrity or the fitness for purpose of the construction work in question.
An added layer of factual complexity emerges where the construction work in question is a high-rise residential building. In Brookfield Multiplex Ltd v Owners Corporation Strata Plan 61288 [2014] HCA 36 the Hight Court unanimously held that a builder did not owe a duty of care to an owners’ corporation of a strata titled serviced apartment building to avoid the economic loss of the owners’ corporation having to repair latent defects in the building’s design or construction. Central to this decision was the fact of the extensive contractual arrangements between the builder, the developer and the purchasers of the apartment units, which included expansive terms dealing with and limiting liability for defects. This precluded a finding of vulnerability on the part of the owners’ corporation.
But what happens in a case like the Opel Tower where design and construction issues emerge sometime after occupation has commenced? A similar issue emerges in the case of flammable cladding which may have been applied to hundreds, even thousands, of buildings across the nation. Purchase contracts for individual lots will often limit the liability for developers, builders and consultants. Bodies corporate/owners’ corporations are not well positioned to seek recovery on behalf of owners based upon the reasoning in the Brookfield Case.
One approach is that identified by the Queensland Court of Appeal in Actron Investments Queensland Pty Ltd v DEQ Consulting Pty Ltd [2018] QCA 147. There the Court found liability for misleading and deceptive conduct (now Australian Consumer Law section 18) accrued to a design engineer based upon the certification process. Where the issue is the content of a certification to the effect that building codes have been complied with, the test will be whether that certification was the expression of an opinion for which there was no reasonable basis (Actron [34], [41] – [46]). One might also anticipate legislative intervention, but there will be a reluctance for that to be given retrospective effect.