Certifier’s duty of care to subsequent owners

In Dix Gardner Pty Ltd v The Owners - Strata Plan 82053 [2017] NSWSC 940, the Supreme Court considered an appeal by a certifier from a decision of the Local Court which found that the certifier had breached its duty of care to the owners corporation of a townhouse development located near the M2 motorway.

The builder of the townhouse development had engaged an acoustic consultant to conduct assessments regarding noise levels and any necessary acoustic treatments that were required for the development to be compliant. It was a condition of consent that a report from an acoustic consultant be submitted to the certifier.

Two reports were prepared by the acoustic consultant, one which set out the acoustic treatments that would be required and a second after the interim occupation certificate was issued and immediately prior to the certifier issuing a final occupation certificate. The second report stated that five of the townhouses in the development were non-compliant with noise criteria and required works to be conducted in respect of sealing the windows and frames. Despite this second report, the certifier issued a final occupation certificate for the development.

At first instance, the owners corporation argued that the certifier owed a duty to the owners corporation to exercise reasonable care, skill and diligence in carrying out the certification, which was breached when the occupation certificate was issued despite the non-compliances recognised in the acoustic consultant’s second report.

The main ground of the certifier’s appeal was that the Court below should not have found that there was a duty of care owed to the owners corporation.

This was firstly argued on the basis that sections 41 and 43 of the Civil Liability Act 2002 (NSW)(the CLA) applied as the certifier was exercising a public function in issuing occupation certificates under the Environmental Planning and Assessment Act 1979 (NSW).

This argument was rejected both at first instance and on appeal on the basis that it is unlikely that the legislature intended for the CLA to capture privately employed certifiers unless the work they were doing involved “very difficult decisions” and the fine balancing of a discretion against public policy implications. As the work conducted by the certifier did not involve any exercise of discretion and primarily involved accessing mandatory and ascertainable prerequisites against a set standard, the Court found that the CLA was not relevant.

Secondly, the Court considered whether a certifier owed a duty of care to a subsequent purchaser, noting that on the facts, the owners corporation was neither a commercial entity (such as in Brookfield or Woolcock St) and not a lone purchaser of a domestic dwellings (as in Chan). Here, the Supreme Court upheld the first instance decision on the basis that it was clear that in the circumstances where the certifier signed a final occupation certificate, knowing that there were significant acoustic rectifications outstanding, he put the owners in a position of vulnerability. Despite being an owners corporation rather than an individual purchaser, each owner could not have been reasonably expected to have looked behind the occupation certificate in order to determine whether it had been properly issued.

Despite finding for the owners corporation in respect of the issue of duty of care, the appeal was upheld on other grounds, namely that the court below had not adequately addressed the issue of proportionate liability. The matter was remitted to the Local Court for further determination.

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Practice and courts

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Champion Homes Sales Pty Ltd v Commissioner for Fair Trading [2017] NSWCATOD 110 Home Building Act 1989 – disciplinary action for breach of statutory warranty penalty of $3,500 set aside – caution.

Dix Gardner Pty Ltd v The Owners – Strata Plan 82053 [2017] NSWSC 940 LOCAL COURT APPEAL – jointly and severally liable - duty of care – duty of care to subsequent purchaser – vulnerability – assumption of reliance – appeal upheld.

Ferraro v Lambert [2017] NSWCATAP 162 Home-building – notice to renew proceedings – appellant inadvertently misled by orders of Tribunal – denial of procedural fairness – question of law – could not be concluded that denial of procedural fairness made no difference to the outcome.

John Maiolo t/as M & N Peninsular Kitchens & Joinery v Chiarelli [2017] NSWSC 982 APPEALS – judicial review – appeal from NSW Civil and Administrative Tribunal Appeal Panel –on question of law only with leave - installation of kitchen – specific performance of contract ordered by Appeal Panel – Appeal Panel gave no concomitant order for Defendant to pay for kitchen upon it being installed – whether denial of procedural fairness by failing to respond to Plaintiff’s applications to amend orders – failure to give reasons – failure to respond to Plaintiff’s substantial, clearly articulated argument – constructive failure to exercise jurisdiction – appeal upheld – matter remitted to Appeal Panel. COSTS – Appeal Panel made no order as to costs – s 60 Civil and Administrative Tribunal Act - whether special circumstances shown - whether costs should be awarded because proceedings alleged to have been brought for a collateral purpose – post-judgment conduct irrelevant to costs orders – proportionality – small amount in dispute – whether any reason shown for leave to be granted - leave to appeal refused – no order as to costs.

Tannous v Leedon [2017] NSWCATAP 158 APPEAL – failure of appellant to appear at hearing below – no adequate explanation provided for that failure – expert evidence filed by the appellant considered by the Member in the decision under appeal – no error of law – leave to appeal required – no evidence provided to found the grant of leave; APPEAL – simultaneous lodging of appeal with an application to set aside the decision of the Member – entitlement to pursue the set aside application doubted – Civil and Administrative Tribunal Regulation, cl 9; Home Building Act 1989 - Confirm the order made in proceedings HB16/17038 on 23 September 2016 that the Appellant is to pay the Respondent the sum of $77,100 immediately.

Staniland v Integrity New Homes Pty Ltd [2017] NSWCATAP 157 Costs- Legislation applicable to the award of costs in pending proceedings commenced prior to establishment day of the Civil and Administrative Tribunal. Discretion- Factors relevant to exercise of discretion, reduction of costs of successful party, findings of fact by primary member - the appellants filed application HB 13/50125 (renewal proceedings) in which the appellants sought to renew the original proceedings. The appellants contended that the respondent had failed to carry out the work as required by the July orders. The appellants sought an order for the payment of $20,000.

Walsh v Sandeberg [2017] NSWCATAP 152 Indemnity costs - Rejection of ‘Calderbank’ Offer.