On 29 April 2015, the Victorian Supreme Court (McDonald J) handed down its decision inBurbank Australia Pty Ltd v Owners Corporation [2015] VSC 160 (Burbank v Owners Corporation). The decision related to whether the Domestic Building Contracts Act 1995 (Vic) (Act) applies to multi-apartment developments and developers.

The Court confirmed the Act applies to residential multi-apartment developments. The Court also confirmed the Act applies to a developer if the nature of the work undertaken by the developer is construction of residential premises.

Consequences of the decision

The decision provides clarification of the instances where the Act will apply to multi-apartment developments.

Builders should be aware:

  • the Act will apply if the work that they are contracted to perform includes the erection or construction of a residential premises, even when the development also includes other uses, such as commercial or industrial; and
  • if the Act applies, the warranties under section 8 of the Act will be implied into the Contract and will run with land pursuant to section 9 of the Act.

Background

The case concerned a claim by Owners Corporation PS 447493 (Owners Corporation) against Burbank Australia Pty Ltd (Burbank), the developer of a residential apartment development known as Waterford Towers. The Owners Corporation alleged that Burbank had undertaken defective construction works on the common property of Waterford Towers and sought to rely on the implied warranties under section 8 of the Act. 

Burbank made an application to the Victorian Civil and Administrative Tribunal (Tribunal) to strike out the proceedings on the basis that the Act does not apply to multi-apartment developments or developers. The application was dismissed. Burbank appealed this decision to the Victorian Supreme Court on the same basis. 

The Court held that the Act applied to the multi-apartment development and the contract between the developer and Burbank. 

The Victorian Supreme Court had not previously directly considered the question of whether the Act applies to multi-apartment developments. The question of whether the Act applied therefore turned on the interpretation of provisions of the Act. 

The Court held that the words used in the Act are clear and unambiguous and support the conclusion that the Act applies to multi-apartment developments. Section 5(1)(a) of the Act provides that the Act will apply to the erection or construction of a ‘home’. The term ‘home’ was construed to include any residential premises, even when that premises is part of a commercial or industrial premises. 

The Court also held that the Act clearly applies to developers. The Court stated that the nature of the work undertaken will determine whether the Act applies to a development, not the identity of a contracting party. In this instance, the work undertaken was the construction of a residential multi- apartment development, so the Act clearly applied to Burbank. 

The Owners Corporation could therefore rely on the implied warranties under section 8 of the Act and commence proceedings against Burbank alleging defective construction works.