1. The recent High Court case of Brookfield Multiplex Ltd v Owners Corporation Strata Plan 612881 considered the issue of whether a builder owes a duty of care to a subsequent owner (in this case, the owners corporation).
  2. At first instance,2 McDougall J found that the builder did not owe a duty of care to the owners corporation. The NSW Court of Appeal found that a duty of care did exist.3
  3. The High Court held that the builder did not owe the alleged duty of care. It was found that the owners corporation was not 'vulnerable'. The sophistication of the parties and the fact that contracts were entered into between the builder and the previous owners (the developer and the apartment owners) demonstrated the parties' ability to protect against any lack of care by the builder.
  4. This decision is the latest in a line of authorities that have considered the issue of whether a builder owes a duty of care to a subsequent owner. Important points include:
  • the key determinant in the area is the notion of 'vulnerability' and the case provides an example as to how that notion is to be applied;
  • where the parties are sophisticated and commercial, a court is unlikely to supplement contractual obligations with a duty to take reasonable care to avoid economic loss;
  • when entering into a deal, parties should carefully address issues of risk management and allocation as part of contractual negotiations; and
  • if a dispute arises, plaintiffs and defendants should carefully consider whether the extent of liability for pure economic loss is in effect governed or limited by the parties' contractual arrangements.