As predicted by our construction law team, the High Court on Wednesday unanimously held in BROOKFIELD MULTIPLEX LTD v OWNERS CORPORATION STRATA PLAN 61288 &
ANOR  HCA 36 that the contractor, Brookfield, was not liable to compensate the strata company (as owner) for latent defects which had gone undiscovered for a period of about 9 years.
The decision gives reassurance to those relying on contractual provisions to limit their exposure to liability for latent defects claims, without changing the existing law regarding the ability to recover damages for latent defects.
The decision was not surprising in our view, in light of the following facts:
- this dispute arose out of a business deal between a group of national property developers, which exercised substantial control over the development from the start and which later became the plaintiff owner, and Brookfield Multiplex;
- the owner’s claims did not involve any damage to property or personal injury: its losses were purely financial;
- the developer/owner had entered into carefully worded contracts with the builder and the investors who eventually bought units in the completed structure such that it could not claim to have been vulnerable and therefore entitled to greater legal protection than its contracts gave it, as against the builder; and
- each of the relevant contracts expressly limited the time for the making of such a claim (being a claim for losses caused by latent defects).
To succeed in its claim for purely financial losses against the builder, the owner would effectively have had to persuade a majority of the Judges in the High Court to find, despite the express limitations in the owner’s contract with the builder (mirrored in contracts for the sale of units in the completed structure by the same owner/developer to third party investors), that the owner had a separate right to be compensated for those losses under the general law of negligence and independently of its contracts. This separate right to be compensated exists but it is reserved for plaintiffs who are vulnerable, in a legal sense, to economic harm because of the defendant’s negligent conduct. In this case, there was no dispute that the builder had breached its duty to take care to ensure that the steel structures were properly galvanised before installation, but a claim for damages had expressly been dealt with in the contracts and the owner was not a “vulnerable” party.
This is general information only, and does not constitute specific legal advice. If you would like further information in relation to this matter or other legal matters please contact our office on Freecall 1800 609 945 or email us now.