Sandy Godfrey has analysed this case, noting that it deals with statutory warranties under section 18B and section 18D(1A) of the Home Building Act 1989 (NSW) (HBA) and the enforceability of statutory warranties against contractors and sub-contractors.

Facts

A developer (who is in receivership and played no role in the proceedings) engaged the first defendant, Brookfield Australia Investments Ltd (builder), to build a residential development—known as 'Beau Monde' in North Sydney—under a design and construct contract. Under a sub-contract between them, G James Glass and Aluminium Pty Ltd (sub-contractor) designed and constructed for the builder certain elements of the facade of the building.

The owners of strata plan number 74602 (owners corporation) claimed damages from the builder for breach of contract and sought orders from the court for the complete facade replacement from the builder and the sub-contractor. The claims concerned water ingress through the window assemblies and the facade as well as other defects.

The owners corporation alleged that the builder and the sub-contractor had breached the statutory warranties under section 18B of the HBA (section 18B warranties) and both of them also owed a common law duty of care to the owners corporation.

The owners corporation argued that:

  • the rectification required was a complete replacement of the facade of the building instead of the individual rectification of defects in the facade;
  • the facts of this case could be distinguished from Brookfield v Owners Strata Plan No.61288 [2014] HCA 36 (Brookfield), where it was held no such duty of care arose;
  • if the developer was a non-contracting owner in respect of the sub-contract, the effects of the section 18B warranties were that the developer should have the same rights against the sub-contractor as against the builder; and
  • it was a successor in title to the developer and by reason of section 18D(1A) of the HBA, it was entitled to the same rights as the developer.

The builder admitted statutory liability and agreed to rectify defects identified by the owners corporation but denied that it owed a common law duty of care to the owners corporation or that the complete replacement of the facade was reasonable rectification.

The sub-contractor denied that it owed a common law duty of care to the owners corporation and denied that it was a party to the construction contract. Further, the sub-contractor argued that claims against it by the owners corporation were barred by statute.

Decision

The court found against the owners corporation:

  • the Brookfield decision was not relevantly distinguishable from this case as the owners corporation was not vulnerable to the possibility of economic loss and there was a building contract in place which contained detailed provisions concerning defects;
  • no common law duty of care existed in respect of the builder or the sub-contractor;
  • the builder's offer of rectification of the defects was reasonable without the facade having to be replaced;
  • the owners corporation could not claim against the sub-contractor as the developer was not a non-contracting owner in respect of the sub-contract; the developer was only party to the building contract and not the sub-contract; and
  • even if the claims under sections 18B and 18D(1) of the HBA were successful, such claims were barred by statute because the limitation period of 7 years for statutory warranties had expired.