Building and Construction based on case of Owners Corporation SP88649 – Lane Cove Council – Local Council – Liability as a Developer

27/04/2016

In a recent case decided 25 January 2016 by a Tribunal Member at NSW Civil and Administrative Tribunal (NCAT) Lane Cove Council had been sued by an Owners Corporation for damages as a result of a claim that there are defects to the building constructed on behalf of the Council. 

The basis of the claim is that there are building defects which are covered by the Statutory Warranties provided by the Home Building Act. 

The question arose as to whether the Council as a developer can be held responsible for the Owner’s losses for breach of the Statutory Warranties. 

Section 3A of the Home Building Act provides the circumstances in which that a Developer can be held responsible for the losses.  Those circumstances include:

1. Work done by a Developer in relation to residential building work as an individual partnership or corporation in circumstances set out in the Act; and
2. Residential building work done in connection with an existing or proposed dwellings in a building or residential development where 4 or more of existing or proposed dwellings are or will be owned by the individual partnership or corporation, or
3.  Residential building work in connection with existing or proposed retirement village or accommodation specifically designed for the disabled where all the residential units are or will be owned by the individual, partnership or corporation. 

In this case the Lane Cove Council argued that it could not be liable as a Developer under the Home Building Act 1999 as the Council is not an individual partnership or corporation pursuant to Section 3A of the Home Building Act and the Council was not “caught” by Section 3A; and accordingly Council could never be liable.

The question that was decided by NCAT was whether the Council was excluded as a  Developer because it was not an individual, partnership or corporation. 

The Tribunal Member considered the Law and decided that in the appropriate circumstance Section 220 Local Government applies and in those circumstances the Council could be a Developer for the purpose of the Home Building Act.  In those circumstances the Tribunal Member held that Section 3A of the Act will apply to the Council in so far as the Section applies to individuals, partnership or corporations.

The above was decided as a preliminary point in the case.  Accordingly the case will now proceed to determine what losses are recoverable by the Owners Corporation due to the claimed breaches by the Council of the Statutory Warranties under the Home Building Act.

One difficulty is that at this stage there has been no decision by a higher Appeal Court as to whether the decision will stand.

Certainly an Owners Corporation should not dismiss possible claims against a Council on the basis that a Council is not bound as a Developer in relation to residential building work under the Home Building Act because the Council is not an individual, partnership or corporation.

If you have any queries or concerns please telephone Richard Watson who is experienced in Building and Construction and strata matters and is specially accredited and has been involved in many building cases but more importantly the resolution of hundreds of building cases over many years.