Court of Appeal revisits negligence against certifiers in relation to defective building works
Building Occupation Certificate problems.
The point of certification appears unclear after the NSW Court of Appeal’s landmark decision in Ku-ring-gai Council v Chan [2017] NSWCA 226.
What is clear is that a certifier, including a council, does not owe a duty of care to subsequent purchasers of property in relation to the manner in which it discharges its obligation as a certifier under the Environmental Planning and Assessment Act 1979 (‘the EPA’).
This is so even though part of the certification process may be whether the property complies with the Building Code of Australia and in circumstances where the occupation certificate is annexed to the contract for sale.
So if defects emerge after the sale, a purchaser has no claim in negligence against the certifier.
The facts of this case and the reasoning of the Court of Appeal are discussed overleaf.
Facts
Mr Acres carried out significant renovations to the house as an owner-builder. He then sold the house to a Ms Chan and Mr Cox.
Mr Acres engaged his local council as the Principal Certifying Authority(PCA). During the course of the renovations the Council inspected the works several times but failed to identify defects, some structural. The Council also failed to identify several non-compliances with the approved plans. Yet on 10 July 2009 the Council issued a final occupation certificate pursuant to section 109E(3) of the EPA.
The certification included that the building was ‘suitable for occupation or use in accordance with its classification under the Building Code of Australia.’
A significant amount of structural and non-structural defects were identified after the sale resulting in a substantial rectification bill.
Proceedings
As Ms Chan and Mr Cox enjoyed the benefit of the statutory warranties prescribed by the Home Building Act 1989 as against Mr Acres as an owner-builder, they issued proceedings against Mr Acres in the Supreme Court claiming damages for breach of the statutory warranties.
Additionally, Ms Chan and Mr Cox claimed, against the Council as certifier and the structural engineer, damages for pure economic loss being the cost of repairing the latent defects. Mr Acres cross-claimed against the Council and the engineer.
Issue
The pertinent issue was whether the Council, as a ‘principal certifying authority’, owed the purchasers a duty to take reasonable care in the issue of an occupation certificate to avoid those purchasers suffering economic loss as a result of the previous owner-builder’s defective building work.
Findings
The Court of Appeal overturned McDougall J at first instance, holding that the Council did not owe a duty of care to the purchasers as there was no reliance by them or assumption of responsibility by the Council that would give rise to such a duty.
Moreover, Ms Chan and Mr Cox were not vulnerable in the sense that they were exposed to, but not able to protect themselves from, the Council’s want of reasonable care in issuing the certificate. The purchasers had the ability to protect themselves against any such failure as they had the protection of the HBA warranties and the, albeit limited, protection of Mr Acres’ home warranty insurance. If the Council had been liable for breach of duty involving reliance on the occupation certificate, it would have been necessary to take into account the value of these rights of the purchasers.
In considering Mr Acres’ claim against the Council the Court found that even though there may have been an action available to Mr Acres in relation to the Council’s lack of reasonable care in issuing the certificate, as Mr Acres had sold for full value he had not suffered any loss.
Mr Acres’ was found liable to the purchasers for breach of the statutory warranties.
Common residential disputes
The construction of a property or the making of additions, alterations and renovations may not always go according to plan. Misunderstandings can arise, small problems can become huge issues and parties find themselves suddenly in dispute.
Residential, or home building work, refers to any work involved in the construction, alteration (or additions to), repair, renovation, extension, decoration or protective treatment of a dwelling.
Residential building work is regulated by the Home Building Act 1989 and associated regulations.
In some circumstances a homeowner (including a subsequent purchaser) may have a claim on the statutory based Home Building Compensation Fund in relation to incomplete and defective residential building work.
Common residential building disputes
- whether work is incomplete
- whether work is defective
- whether work is complete
- whether other structures, such as retaining walls, have suffered damage as a result of the home building work,
- progress payments
- the value of the work
- variations
- termination of the contract
- licensing and insurance.
Do you need advice on a building dispute?
I am an experienced construction lawyer working on Sydney’s Northern Beaches.
I provide practical and cost-effective service to property owners, builders and strata managers.