No Duty of Care owed by Builder to Owners Corporation

In Owners Corporation Strata Plan 72535 v Brookfield [2012] NSWSC 712, the NSW Supreme Court (McDougall J) reviewed the evolving law in relation to duty of care owed by a builder to future owners, with whom the builder has no contract. McDougall J concluded that the builder of a strata development in Terrigal did not owe a duty of care to the owners corporation in relation to defects in the common property. His Honour concluded that, on the basis that the apartments were residential building work (taken as at the time the building contract was entered into), and therefore the statutory warranties applied.

His Honour considered that Bryan v Maloney did not support a duty of care in this instance, for 3 reasons:

  1. The Owners Corporation had the benefit of the statutory warranties. The courts should be slow to substitute its view as to the extent that a builder is to be liable to a subsequent owner, quoting the dissenting view of Brennan J in Bryan v Maloney:

It would be anomalous to have claims relating to the condition of the building by an original owner against the builder determined by the law of contract if the relief claimed by the remote purchaser against the builder would be determined by the law of tort. Such a situation would expose the builder to a liability for pure economic loss different from that which he undertook in constructing the building and would confer a corresponding right on the remote purchaser which the purchaser had not sought to acquire from the vendor (45). It would be tantamount to the imposition on the builder of a transmissible warranty of quality. In some jurisdictions, Parliament has provided such a remedy by statute. The social question whether building costs should be inflated to cover the builder’s obligation under such a transmissible warranty in an appropriate question for parliaments to consider but, in the absence of compelling legal principle or considerations of justice reflecting the enduring values of the community, the courts should not decide to extend remedies not hitherto available to remote purchasers of buildings without considering the cost to builders and the economic effect of such an extension. Those are questions which the courts are not suited to consider. The extension of remedies in that direction is properly a matter for Parliament

  1. Proximity, important in the determination in Bryan v Maloney, was later discarded by the majority in Woolcock Street.
  2. In Bryan v Maloney, the builder had owed a duty of care to Mrs Maloney’s predecessor.

His Honour noted that Woolcock Street had relied on “vulnerability” in relation to duty of care, and the availability of statutory warranties to the Owners Corporation. McDougall J further noted the potential cost if such a duty of care existed.