Supreme Court hand down game-changing decision regarding application of Domestic Building Contracts Act to residential developers
On 29 April 2015, the Victorian Supreme Court handed down its judgment in Burbank Australia Pty Ltd v Owners Corporation PS 447493 [2015] VSC 160, which concerned an appeal from a decision of the Victorian Civil and Administrative Tribunal, in relation to allegations of defective building works in the common property of the ‘Waterford Towers’ apartment building built by Burbank in the Melbourne suburb of Maribyrnong.
The court considered two key issues relevant for building practitioners:
- Does the Domestic Building Act 1995 (Act) have any application to multi-apartment residential development?
- Are developers entitled to rely on the Act?
The application of the Act to multi-apartment residential developments
Burbank submitted that the Act had no application to multi-apartment residential developments such as Waterford Towers, and that given the owners’ corporation’s claim was based solely on breach of the implied warranties contained in section 8 of the Act, their claim must be dismissed.
In the absence of previous binding authority, McDonald J was tasked with interpreting the relevant provisions of the Act to determine whether the Act applied to multi-apartment residential developments.
McDonald J ultimately decided that the provisions of the Act did apply to multi-apartment residential developments. His Honour considered the construction of such developments was ‘domestic building work’ within the meaning of section 3 of the Act in that it involved either construction of homes pursuant to section 5(1)(a) or was work associated with the construction of a building on land that is zoned for residential purposes and in respect of which a building permit was required pursuant to section 5(1)(e).
His Honour in deciding that the Act applied to multi-apartment residential developments held that he could not discern:
“… any basis for excluding the owner of a residential apartment from the benefits which are conferred by the Act. Such an outcome would create two classes of residential premises: a stand alone dwelling house and a residential apartment. The owner of a stand alone dwelling house would have the benefit of [the Act] whilst the owner of a residential apartment would not. This outcome would not promote the purpose and / or the objects of [the Act]”.
Are developers entitled to rely on the Act?
In support of its argument that the Act did not apply in this case, Burbank sought to rely on the judgment of Warren CJ in the earlier decision of Kane Constructions Pty Ltd v Sopov [2005] VSC 237 where, in considering whether the Act applied to a mixed use development, Her Honour held:
“I have difficulty in accepting that in a project such as the present where it is a combined, mixed use development of residential, office and gallery and restaurant, developed by a developer, it should be subject to the protections enshrined in [the Act]. Picking up on the observations of Hansen AJA in Winslow Constructions, it seems to me that the Act was not intended to apply to developers, and for that reason alone the provisions have no bearing on the present case. Even so, [the Act] could only have application to those parts of the project intended for domestic residential use…
I am of the view, therefore, that the Act does not apply to a project such as the present. However, in the event that the Act did apply, it would be appropriate to consider its application so far as it went to the residential component of the development.”
McDonald J did not consider himself to be bound by Warren CJ’s remarks, and considered that Warren CJ had expressly left open the question of the Act’s application to those parts of the development which were for residential purposes.
In deciding that the Act applied to developers, his Honour held:
“It is misconceived to frame a question concerning the application of [the Act] by reference to the identity of a contracting party (save for a contract between a builder and a sub-contractor), whether that party be a developer, builder, vendor or purchaser. Section 5 of [the Act], which prescribes the work covered by the Act, directs attention to the nature of the work undertaken rather than the parties to the contract governing the work in question".
Key messages
Building practitioners should now be aware that multi-apartment residential developments will be subject to the Act, which includes the implied warranties provided for in section 8, which are usually relied upon in a claim for defective works in the Victorian Civil and Administrative Tribunal.
The Act will apply regardless of whether the contract involves a developer.
For more information please contact:
Richard Anderson
Principal
Harwood Andrews
T: 03 5226 8524
E: randerson@harwoodandrews.com.au
Ben Broadhead
Special Counsel
Harwood Andrews
T: 03 5226 8549
E: bbroadhead@harwoodandrews.com.au