Land Owners Found Not Liable Under Home Building Act

On 9 June 2017, the Supreme Court of NSW found in Owners Strata Plan No 66375 v Suncorp Metway Insurance Limited (No.2) [2017] NSWSC 739, that the land owners were not liable as developers under the Home Building Act 1989 (NSW) applicable in 2000.

David and Gwendoline King (the Kings) owned a heritage listed warehouse in Camperdown, NSW.  In 2000, they entered into an agreement with a development company, Meridian Estates Pty Limited (Meridian Estates), to undertake the development in exchange for a fee. The Kings were directors of Meridian Estates at the time. Following a tender process, Meridian Estates engaged a builder, Beach Constructions Pty Ltd, to convert the warehouse into a mixed use development.

Following appointment of the builder, construction began. The building contained various defects including waterproofing and fire safety issues. The Owners Corporation sued the Kings on the basis that they were developers under the Home Building Act (HBA) and therefore liable for loss and damage suffered as a result of breaches of the statutory warranties.

The key dispute was whether the Kings (as land owners) were parties to the construction contract. If they were, under the HBA at the time, they would be persons “on whose behalf” the building work was done and therefore liable for the defects (Ace Woollahra Pty Limited v The Owners Strata Plan 61424 (2010) 77 NSWLR 613).

Certain site meeting minutes contained statements to the effect that after the construction work began, the architect were still preparing “contract documents” and that ultimately, “the contract” had been executed by the Kings.

The Owners Corporation tendered two versions of a construction contract signed by the builder, but not the Kings. The Owners Corporation submitted that the Court should infer from the evidence that the Kings signed the contract and by doing so, became parties to the contract.

The Kings denied that they were developers within the meaning of that phrase in the Act.  Almost 10 years after the proceedings commenced, the Supreme Court agreed.  The Supreme Court refused to draw those inferences and found that the Owners Corporation failed to discharge the onus of establishing the Kings signed a contract. This was on the basis that:

  1. it is not established that the representations contained in the site meeting minutes were made by persons who had or could reasonably be supposed to have had personal knowledge of the facts asserted. That is, there is no reason to believe that anyone who made the representations saw the Kings sign the contract; and
  2. even if the Kings did sign the contract, the minutes do not prove that they did so in their personal capacity, rather in their capacity as directors for Meridian Estates.

In a judgment of Justice Ball, the Supreme Court found that the Kings were not developers and, therefore, had no liability to the Owners Corporation for any breaches of the statutory warranties.

This meant an absolute victory for the Kings.

It should be noted that after 25 October 2011, being the date of the commencement of an Amendment Act to the HBA, land owners are deemed to be developers irrespective of whether they are parties to the relevant construction contract.

Nevertheless, this decision serves as a timely reminder that for contracts and proceedings that are not the subject of the Amendment Act, proper inquiry should be made by a plaintiff as to the identity of the parties to the contract before commencing and pursing claims against the land owners at the time of the development. On the other hand, land owners should not always assume that they are liable for the statutory warranties under the HBA.

William Roberts Lawyers acted for the Kings in this matter.

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