Case: Brookfield v Owners Corporation
Written on the 23 July 2021
On 8 October 2014, The High Court of Australia announced its decision for Brookfield Multiplex Ltd v Owners Corporation Strata Plan 61288. The Court has decided that the builder of the strata-titled complex did not owe the Owners Corporation a common law duty of care.
Background: the Brookfield's Case
Litigation was taken by the Owners Corporation Strata Plan 61288 (Owners Corporation) against Brookfield Multiplex Ltd (Brookfield) to claim the cost of rectifying damages, where latent defects were discovered in the common property of the apartment complex.
Brookfield built an apartment complex on land owned by the developer, and therefore, a design and construct contract was made. The design and construct contract contained detailed provisions of the quality of work needed to be performed by Brookfield and required Brookfield to remedy defects within a certain liability period. The contract of sale to purchasers of the serviced apartments (Owners Corporation) is annexed to the design and construct contract, conveying the purchasers' contractual rights to defect claims.
As a result, the Owners Corporation claimed that it suffered from an economic loss since its builder, 'Brookfield', breached its common law duty of care. Hence, the Owners Corporation commenced proceedings against Brookfield to recover damages, including the cost of rectifying the defects, the declining value of the building, and the loss of income during the period.
Initially, the primary judge held that Brookfield did not owe the duty of care to the Owners Corporation. The Court first declared that the contract solely dealt with the relationship between parties, not concerning the duty of care propounded by the Owners Corporation.
After an appeal was raised, the Court of Appeal unanimously overturned the previous decision. The NSW Court of Appeal held that Brookfield did owe a duty of care to the Owner Corporations. Brookfield is liable to exercise reasonable care of the construction to avoid any economic loss caused by building defects. Furthermore, the Court held that the contractual relationship between parties includes liability for defects that usually appear under contract law.
The case did not take an end yet.
Brookfield appealed to the High Court after being granted special leave. On the other hand, the Owners Corporation raised a cross-appeal after being granted special leave. The High Court dismissed the cross-appeal, and in the end, allowed the appeal. At last, the High Court overturned the decision found by the Court of Appeal and held that Brookfield did not owe a duty of care to the Owners Corporation.
The Court has highlighted some of the reasons behind its decision, which is presented in the following:
- The Owners Corporation came into existence upon the completion of the building construction. Therefore, there was no assumption of responsibilities by the builder at that time.
- The Owners Corporation was not responsible for paying anything vested in the common property. Hence, it was hard to argue that the Owners Corporation suffered from any damages caused by the latent defects.
- The design and construct contract contained detailed provisions with respect to the quality of work that Brookfield needed to perform. The High Court indicated that the purchasers had the choice to not proceed with the sale or could have renegotiated the defect protection terms and conditions.
Hall & Wilcox