Body Corporate for Aurelia v Highlife Homes Pty Ltd [2024] QCAT 134

QUEENSLAND CIVIL AND ADMINISTRATIVE TRIBUNAL CITATION: Body Corporate for Aurelia CTS 55091 v Highlife Homes Pty Ltd [2024] QCAT 134 PARTIES: BODY CORPORATE FOR AURELIA CTS 55091 (applicant) V HIGHLIFE HOMES PTY LTD (respondent) APPLICATION NO/S: BDL152-22 MATTER TYPE: Building matters HEARING DATE: 12 February 2024 DELIVERED ON: 22 March 2024 HEARD AT: Brisbane DECISION OF: Member Lember ORDERS: The application for a domestic building dispute filed 25 May 2022 is dismissed. Any application for costs is to be made by filing in the Tribunal two (2) copies and giving one (1) copy of any submissions and evidence to be relied upon to each other party by 4:00pm on 19 April 2024. If an application for costs is made in accordance with order number 2: (a) the responding party is to file in the Tribunal two (2) copies and give one (1) copy to the party making the application any submissions and evidence in response by 4:00pm on 3 May 2024; and (b) the application will be determined on the papers and without an oral hearing, not before 4:00pm on 3 May 2024. If no application for costs is made in accordance with order number 2, there shall be no order as to costs in this proceeding. CATCHWORDS: TORTS – NEGLIGENCE – ESSENTIALS OF ACTION FOR NEGLIGENCE – DUTY OF CARE – SPECIAL RELATIONSHIPS AND DUTIES – OTHERS – building and construction – where claim arises in negligence where -- 1 of 16 -- 2 there is no building contract between the parties - whether subsequent body corporate owed a duty of care by builder – whether subsequent body corporate was vulnerable - whether building work was defective Aquatec-Maxcon Pty Ltd v Barwon Region Water Authority (No 2) [2006] VSC 117 Brookfield Multiplex Ltd v Owners Corporation Strata Plan [2014] HCA 36 Body Corporate for Aurelia CTS 55091 v Highlife Homes Pty Ltd [2023] QCAT 284 Bryan v Maloney (1995) 182 CLR 609 Canavan v Sutton [2020] QCAT 374 Donoghue v Stevenson [1932] AC 562 Graham Barclay Oysters Pty Ltd v Ryan [2002] HCA 54 Landman v Lauder & Anor [2018] QCAT 395 McSwan & Anor v Weaver [2023] QCAT 148 Ultramares Corporation v Touche (1931) 174 NE 441 Woolcock Street Investments Pty Ltd v CDG Pty Ltd (2004) 216 CLR 515 Body Corporate and Community Management Act 1997 (Qld) s 220, s 221, s 223, s 224 Civil Liability Act 2003 (Qld) s 7, s 9, schedule 2 Queensland Building and Construction Commission Act 1991 (Qld), s 43D, s 43E, s 47, s 77, schedule 2 Queensland Civil and Administrative Tribunal Act 2009 (Qld) s 100 APPEARANCES & REPRESENTATION: Applicant: Self-represented by A and B van der Kwast (Body Corporate committee members and lot owners). Respondent: Self-represented by J George (director). REASONS FOR DECISION What is this application about? Highlife Homes Pty Ltd (‘Highlife’) constructed a four-lot townhouse complex (‘Aurelia’) for developer, AB Wilkinson Pty Ltd (‘Wilkinson’). Wilkinson sold the townhouses off-the-plan to buyers whose interests are, effectively, represented in these proceedings by the applicant Body Corporate for the Aurelia CTS 55091 (‘the Body Corporate’). It is alleged by the Body Corporate that the concrete pathways and driveway constructed by Highlife and forming part of the common property of the Body Corporate, are defective and require rectification works. The issue in this application is whether Highlife is responsible to the Body Corporate for loss arising from defective building works. By an application for a domestic building dispute filed 25 May 2022 the Body Corporate asks the tribunal to order that Highlife pay it damages up to $27,880.00 -- 2 of 16 -- 3 (being the highest quoted rectification costs),1 and its costs of the application, including a filing fee and fees paid to their expert witness for an inspection, report, and appearance at the hearing. Submissions on costs were not made at the hearing and are called for in the directions made herein. As Senior Member Brown observed in an interlocutory decision in Body Corporate for Aurelia CTS 55091 v Highlife Homes Pty Ltd [2023] QCAT 284, the Body Corporate did not have a contract with Highlife and, therefore, its claim lies only in negligence. To succeed, the Body Corporate must establish that Highlife owed it a duty of care, what the scope of that duty is, that Highlife breached that duty, the loss caused by the breach and prove the loss.2 Highlife say that the building works are not defective, that any complaints about the driveway are cosmetic in nature only and denies that it owed the Body Corporate a duty of care because the Body Corporate was not ‘vulnerable’ to Highlife. The parties came before me for a Tribunal Hearing on 12 February 2024. Evidence was given by Mr and Mrs van der Kwast, for the Body Corporate, by Mr George for Highlife and by expert witnesses, Mr Ferris (for the Body Corporate) and Mr Carpenter (for Highlife Homes). My decision, and the reasons for it, follow. Is the application a “building dispute” over which the tribunal has jurisdiction? Section 77 of the Queensland Building and Construction Commission Act 1991 (Qld) (‘QBCC Act’) confers jurisdiction on the tribunal to hear building disputes. A building dispute includes a “domestic building dispute”3 which, in turn, includes (among other things) a claim or dispute in negligence, nuisance or trespass related to the performance of reviewable domestic work other than a claim for personal injuries.4 ‘Reviewable domestic work’ means ‘domestic building work’,5 which includes work comprising the erection or construction of a detached dwelling, which I am satisfied the townhouses are. As it is clear from the material filed, and not disputed by either party that the work the subject of the claim is domestic building work, and that the claim against Highlife lies in allegations of negligence with respect to that work. Therefore, I am satisfied that the dispute the subject of the application is a ‘domestic building dispute’. Section 77(2) qualifies the tribunal’s jurisdiction to hear building disputes by stipulating that an application cannot be made to the tribunal unless the applicant “has complied with a process established by the commission to attempt to resolve the dispute”. 1 Affidavit of Jeannene Lovett sworn 27 October 2022 (Exhibit 4), Annexure 17. 2 Landman v Lauder & Anor [2018] QCAT 395 at [3]. 3 QBCC Act, Schedule 2 (definition of “building dispute”). 4 Ibid, Schedule 2 (definition of “domestic building dispute”). 5 Ibid, Schedule 2 (definition of “reviewable domestic work”). -- 3 of 16 -- 4 A letter from the Queensland Building and Construction Commission (‘QBCC’) dated 19 May 20226 confirms that the requirements of section 77(2) have been met and that the tribunal has jurisdiction to hear this dispute. Factual background to the dispute Building works by Highlife (contracted by Wilkinson) Highlife and Wilkinson entered a Commercial Building Contract dated 21 December 2020 for the construction of the Aurelia project.7 That contract relevantly provided that: (a) In item 1 of the Schedule, read with clause 1, the “Principal” was Wilkinson and its “administrators, permitted assignees and transferees”. (b) In clause 8 read with clause 1, that Highlife will comply with all statutory requirements for the building work. (c) In clause 10.2 that Highlife warrants that it will carry out the work with reasonable care and skill, in accordance with drawings and specifications, with reasonable diligence and in accordance with all laws and requirements, including the Building Act 1975 (Qld). (d) In clause 20 read with item 10 of the schedule, that the during the defects liability period of twelve months from the day following the date of practical completion the Principal could give Highlife written notice of defects and Highlife was required to rectify them. (e) In clause 31.4 that neither party may assign the contract or any right, benefit, obligation, or liability under it without the written consent of the other party. On 4 February 2022, the City of Gold Coast (Council) deemed the practical completion inspection unsatisfactory, requiring certain stormwater and drainage works, asphalt patching and joins works, driveway frontages and other works to be undertaken.8 A Form 11 Certificate of Occupancy issued on 22 February 2022.9 The practical completion defect works were undertaken such that on 25 July 2022, the property passed its reinspection.10 Sale Contracts between Wilkinson and lot owners Each buyer entered a contract with Wilkinson to purchase their respective townhouse lot in the Aurelia complex, once constructed. Not all contracts are in evidence, but the Lovett contract (lot 4) was entered into on 5 May 2021,11 the van der Kwasts gave evidence that each buyer purchased “pre-construction” and it is understood each contract adopted the same or substantially similar terms. 6 Affidavit of Jeannene Lovett sworn 3 December 2022 (Exhibit 3). 7 Affidavit of James George sworn 28 November 2022 (Exhibit 9). 8 Ibid. 9 Ibid. 10 Ibid. 11 Affidavits of Jeannene Lovett sworn 16 June 2022, Annexure 1 (Exhibit 8). -- 4 of 16 -- 5 Relevantly, those terms included:12 (a) In clauses 4.4(3) that the Body Corporate would be established by Wilkinson prior to settlement and in clause 6.1(1) that settlement would be triggered, among other things, by the establishment of the scheme creating the Body Corporate. (b) In clause 7.2 that Wilkinson was to repair any defects in the lot at its cost, on notice given by the buyers within sixty days of the completion date. (c) In clause 7.4, that the buyers could not require the seller to repair any defects in the lot before completion, to delay completion pending repair of the defects, to withhold any part of the sale price pending repair of the defects, or to claim compensation other than the repair cost of any defect if the seller fails to rectify. (d) In clause 7.5 that the architect retained by Wilkinson will act as an expert in any dispute regarding lot defects and their decision will be final and binding on the parties. (e) In clause 7.7 that the seller’s warranties were as set out in the contract and in section 223 of the Body Corporate and Community Management Act 1997 (Qld) (‘BCCMA’) and record “the seller’s entire responsibility to the buyer in relation to the property” and that “no other warranties or representations are express or implied”. The sale contracts were silent on the issue of the buyers’ rights regarding defects in the common property, as opposed to their individual lot. Sections 220 to 224 of the BCCMA deal with warranties that are implied in contracts for the sale of proposed lots in a community title scheme and grants termination rights that override the terms of a sale contract in the event of a breach of those warranties. Section 223 details the implied warranties as follows (emphasis added): 223 Implied warranties (2) The seller warrants that, as at the date of the contract— (a) to the seller’s knowledge, there are no latent or patent defects in the common property or body corporate assets, other than the following— (i) defects arising through fair wear and tear; (ii) defects disclosed in the contract; and (b) the body corporate records do not disclose any defects to which the warranty in paragraph (a) applies; and (c) to the seller’s knowledge, there are no actual, contingent or expected liabilities of the body corporate that are not part of the body corporate’s normal operating expenses, other than liabilities disclosed in the contract; and (d) the body corporate records do not disclose any liabilities of the body corporate to which the warranty in paragraph (c) applies. 12 Affidavits of Jeannene Lovett sworn 16 June 2022 (Exhibit 8). -- 5 of 16 -- 6 (3) The seller warrants that, as at the completion of the contract, to the seller’s knowledge, there are no circumstances (other than circumstances disclosed in the contract) in relation to the affairs of the body corporate likely to materially prejudice the buyer. Examples for subsection (3)— 1 An administrator has been appointed under the order of an adjudicator under the dispute resolution provisions. 2 The body corporate has failed to comply with the provisions of this Act to the extent that its affairs are in disarray, records are incomplete and there is no reasonable prospect of the buyer finding out whether the warranty mentioned in subsection (2)(b) has been breached. (4) For subsection (2), a seller is taken to have knowledge of a matter if the seller has actual knowledge of the matter or ought reasonably to have knowledge of the matter. The defects did not exist at the contract date, and it cannot be said that the defects best summarised at paragraph [61] are matters likely to materially prejudiced the buyers, and, therefore, the implied warranties in section 223 of the BCMA were not breached by Wilkinson in the course of the sale. Settlement of Sale Contracts Mr Wilkinson did not attend the hearing. He gave written evidence that:13 (a) He was “very happy with the end result of this project”. (b) He understands that the development was completed to a “good standard as all necessary milestones were met” and all final approvals and certificate from relevant consultants including builders, engineers and Council were received. (c) There were some minor defects that the buyers requested attention to during the pre-handover stage, but these were attended to by Highlife prior to settlement occurring and, as far as he was aware, there was no evidence whatsoever of any major defects or issues. (d) In January 2022, Mr and Mrs Lovett conducted a pre-purchase inspection and contacted Mr Wilkinson afterwards to advise that they were not happy with the finish of the driveway. They requested that Highlife redo the driveway to a better standard. (e) By 6 February 2022, three of the four buyers had undertaken pre-purchase inspections and given a list of rectifications to Wilkinson. (f) On 6 February 2022, Highlife declined to Wilkinson to redo the driveway, stating that it was within necessary standards and tolerances. (g) Mr and Mrs Lovett, “continued to insist that [Wilkinson] do something about the driveway for the next few months”. (h) On 25 February 2022, Mr Lovett sent an email in which he states, among other things, that: 13 Affidavit of Alex Wilkinson sworn 25 November 2022 (Exhibit 11). -- 6 of 16 -- 7 This property was handed back to the developer in the middle of December. We are now at the end of February; one would think that ample time to rectify any issues. I approach Mr Wilkinson’s evidence regaling the quality of the concreting work with a measure of caution because: (a) he concedes that he has “a very limited development/construction experience with this in fact being my first project”; and (b) he “relied heavily on the building Highlife Homes and all the consultants I engaged for guidance”; and (c) his location interstate and COVID-19 border closures and lockdowns restricted his ability to visit the site. It is not clear that he ever, in fact, inspected the property after the driveway works had been undertaken. However, to the extent Wilkinson gives evidence of the pre-purchase inspections by and discussions with the lot owners, it is consistent with the evidence given by those lot owners, via the Body Corporate in these proceedings. It is also noted that Wilkinson controlled the Body Corporate from the date the scheme was established until after the lot owners settled their purchase contracts. He took no steps as the Body Corporate during that time to make demand upon Highlife to rectify their work, because he did not consider the work to be defective. The Body Corporate’s evidence Lot owners The Lovetts gave evidence that Wilkinson was made aware of defects in the driveway in December 2021,14 supported by text messages exchanged around 23 December 2021 with Wilkinson’s agent, Mr Yu wherein they raise concerns about works, including the driveway. On 19 January 2022, Mr Lovett received an email from Mr Smith, Hanson Concreting who had inspected the driveway and observed that “the finish is poor with varying levels of exposure across the length of the driveway”. Mr Smith suggested that “honing or covercrete would be the only options available to enhance the appearance”. Nitin Kumar (lot 2) gave evidence that they attended the property on 25 April 2022 for a pre-purchase inspection of the property, walking through the house and the driveway and “all seemed ok”. However, following settlement and a period of rain, the driveway began collecting/pooling water and random rust marks appeared.15 Dearne Dragicevic (lot 1) gave evidence that they purchased the property on 6 May 2022 and observed that “the driveway is poor, varying in colour throughout, holds water, uneven in parts, rust marks starting to appear, with all the recent rain we have had”.16 The van der Kwasts (lot 3) took possession of their lot on 13 May 2022. They gave evidence that prior to possession they had temporary access to the property and considered the driveway to the property to be “only just adequate and sound”. Since 14 Affidavit of Jeannene Lovett sworn 3 December 2022 (Exhibit 3). 15 Affidavit of Jeannene Lovett sworn 16 June 2022 (Exhibit 8). 16 Ibid. -- 7 of 16 -- 8 taking possession, they have seen a significant deterioration in the quality and standard of the driveway, including discolouration, ponding, and rust marks. The van der Kwasts also gave evidence that lot owners were not provided with a copy of the building contract between Highlife and Wilkinson until June 2022. Finally, the van der Kwasts spoke for the lot buyers in saying that they were due to settle on the lots, originally, in around November 2021 but were delayed several months. They were “living out of suitcases” and “homeless” because of project delays. They feel the driveway and concreting were “rushed through” as the last portion of work for the project. Each lot owner did building inspections and raised concerns about common property defects and the situation became “very messy and complicated” and involved what they described as “ducking and weaving” by Wilkinson and his agents. Expert evidence of Mr Tilney Mr Tilney is a concreter of over 30 years’ experience. Following an inspection of the driveway he wrote a letter dated 14 September 2022 in which he observed the following: 1. Inconsistent colour and the levels of wash off for exposed concrete. Not matching each pour. 2. The falls are incorrect to the water pits, as they are holding water and not going into the pits. Will need to have concrete removed to re-lay concrete to allow the correct falls for water to go into pits. Due to the poor workmanship, I would suggest a camera be put down the pits to ensure the stormwater is not blocked by slurry from the wash off of Exposed Concrete. 3. In-consistent saw cuts and width of the cuts. These cuts should be all the same width to be pleasing to the eye. 4. Joint sealing is recommended to rectify these cuts to be more consistent with each other. 5. The quality of the job in general is unsatisfactory, and the standard of the prep work needs to be looked into to ensure the base has been prepped to the engineers’ requirements. I would suggest an x-ray to ascertain thickness and steel size and if construction joints are in the correct positions as per the Engineers details. 6. The quality of this job is very poor workmanship, and I assume a Licence would be held by the Concretor who did this job. I believe this Concretor should not hold a licence due to the very poor standard of work on this job. 7. The builder should have stopped work on this prior to the additional pours on the job. This would have alleviated the mess it now is, and a new Contractor should have been engaged to rectify the job, before it went any further. You could see from the first pour of concrete, it was not a great job. The owner has paid for an Australian Standard build, and this is not in the standard. It should be rectified, and a new Contractor appointed to complete to the Australian Standards. A very poor job in my opinion. I would be disappointed if this job was completed for me as a home builder. Mr Tilney was not made available to give evidence or be cross-examined at the hearing. -- 8 of 16 -- 9 Expert evidence of Mr Ferris Mr Ferris is the general manager/ building inspector for K-Spec Building Consultants. He holds a QBCC Residential Building Inspectors licence, a Cert IV in Building and Construction and a QBCC Building Supervisors licence in addition to other qualifications. On 24 October 2022 he inspected the pathways and driveway following a period of prolonged rain. Among other things Mr Ferris states in his report that: (a) There are inconsistencies to the surface of the exposed aggregate across all areas of the concrete including pathways, such inconsistencies not being typical of a licenced tradesperson in Queensland. Photographs showing inconsistencies in exposed finish included at paragraph 1.14 of the report: (b) Whilst the variations in consistency will not affect the serviceability or intended use of the area, it is reasonable to assume that it will lead to accelerated deterioration of the surface and potential for ongoing maintenance. (c) Water ponding and undulations could pose a potential safety hazard to residents/pedestrians and should be addressed. (d) The construction joint in the centre of the drive between the front and rear boundary has viable signs of concrete spatter and footprints, indented 6mm to 8mm and holding water in the initial stages of the inspection. (e) Isolation joints to lots 1, 2, 3 or the driveway to kerb and channel junction were not observed, and only partially identified to the rear courtyard of lot 1 per requirements of AS3727.1:2016 Part 5.4.3. -- 9 of 16 -- 10 (f) The driveway pavement control joints have been installed and are performing, with no evidence of significant cracking identifiable a the time of inspection. Any fine cracking identified did not exceed the tolerations outlines in AS2870- 2011 table C2. (g) Given the general coverage of defective surface and incorrect or missing isolation joints, it is recommended that remedial works be considered reasonable, with the best option being and cover and conceal to all exposed concrete throughout the site. On cross-examination Mr Ferris conceded the following: (a) AS3727.1:2016 is not part of the Building Code or NCC. (b) AS2870-2011 does not apply to driveway slabs and only applies to residential slabs and footings. In referring to that standard in his report, his intention was to simply to indicate that the minor cracking observed did not even exceed tolerations in that higher, albeit not applicable standard. (c) There is no structural cracking and, structurally, the driveway is “very good”, which is why he was not advocating to remove and to re-lay the driveway. (d) The potential for trip or slip hazards arising from the driveway and concreting work was “unlikely” and there was a “slim chance” of a safety hazard, but still a chance. Highlife’s evidence Mr George Mr George had little evidence to offer, other than to rely on the evidence of Mr Wilkinson, Mr Carpenter and his cross-examination of Mr Ferris. Expert evidence of Mr Carpenter Mr Carpenter is a ‘Defects and Quality Expert” at Datum Building Consultancy Pty Ltd. He holds QBCC licenses for Residential Building Inspection – Nominee Supervisor, Builder – Open - Site Supervisor, and Builder - Medium Rise - Nominee Supervisor. His report17 was prepared following a fifteen-minute site inspection, during a period of rain, and when vehicles were parked on and, therefore, partially obscuring the driveway. In Mr Carpenter’s opinion: (a) The appearance of the concrete surface of the driveway has defects which include water ponding mainly in two areas, and cosmetic defects in other areas across the surface. (b) The defects are “cosmetic and minor” when assessed in relation to, for example, the QBCC Rectification of Building Work Policy. (c) There is no suggestion or evidence the driveway is not performing its intended function. 17 Exhibit 2. -- 10 of 16 -- 11 (d) There is no evidence to support the proposition that the concrete will degrade over time or to cause ongoing maintenance, except for that normally expected (for example, periodic washing). On cross-examination Mr Carpenter said that: (a) The fifteen-minute timeframe of his inspection was sufficient for him to walk the area ‘two to three times’ and he considered he spent enough time to assess the surface of the concrete, particularly given that he was armed with Mr Ferris’ report, including his measurements and the photographs he took. (b) His inspection took place eighteen months after Mr Ferris’ and that this was ample time for him to observe deterioration, if there was going to be any. (c) There are no structural defects in the driveway, and only minor cosmetic concerns. (d) Ponding water is a ‘major issue” and the footprints and tool indentations should have been attended to by the concreter prior to handing over the works as they were defects caused by inattention and indifference in the laying process by the concreters themselves. (e) However, the ponding will not have a health and safety impact and will not impact the life of the driveway - it is a mere nuisance only. Nor will it ever worsen to be a trip hazard, including by the build-up of mould, because typical maintenance and cleaning would attend to that risk. Did Highlife owe the Body Corporate a duty of care? At common law a duty of care will generally arise when the defendant should have foreseen that their conduct could result in injury to the plaintiff.18 The Civil Liability Act 2003 (Qld) (‘CLA’) must be applied to all civil claims for damage to property or economic loss where a duty of care is alleged. Schedule 2 of the CLA defines relevant terms as follows: (a) “Damages” is defined as including any form of monetary compensation; (b) “Duty” includes a duty of care in tort, under contract that is concurrent and coextensive with a duty of care in tort or duty under statute; (c) “Duty of care” means a duty to take reasonable care or to exercise reasonable skill (or both duties); and (d) “Harm” means harm of any kind, including damage to property and economic loss. Though not codifying the common law,19 the CLA restates common law principles, with some modifications. It is well-established that the relationship of a professional licensed builder to a homeowner client is a category of relationship where a duty of care is owed because 18 Donoghue v Stevenson [1932] AC 562. 19 7(5) of the Civil Liability Act (2003). -- 11 of 16 -- 12 it is reasonably foreseeable that if care is not taken by the builder the client is likely to suffer loss and damage.20 In determining whether a builder owes a duty to subsequent owners the current approach of the High Court begins with the test of reasonable foreseeability of harm, followed by a consideration of ‘salient factors’.21 Foreseeability of harm There is a high probability of needing to rectify defective building work if care is not taken in the build, therefore, the out-of-pocket costs of undertaking those rectification works is a reasonably foreseeable economic loss arising from defective building work. However, where a purchaser under a contract of sale can negotiate or exercise a contractual right to protect itself from potential loss under the terms of the contract with the seller, it is difficult to see how a likelihood of economic harm to the purchaser, caused by the original builder, can arise. Salient factor: Vulnerability Vulnerability has emerged as an important requirement in cases where a duty of care to avoid economic loss has been held to have been owed. Vulnerability considers not what the person who suffers harm did, but what they could have done, to protect themselves, with a balance to be struck between “the traditional cornerstone of foreseeability and commercial realities”.22 As to the vulnerability of subsequent purchasers: (a) In Bryan and Maloney (1995) 182 CLR 609 (‘Bryan’) it was affirmed that a builder owed the first owner a duty of care to avoid economic loss of [defects in construction, and that it may be (and in that case was) liable in negligence for damages to a subsequent purchaser. (b) In Woolcock Street Investments Pty Ltd v CDG Pty Ltd [2004] HCA 16 (‘Woolcock’) the question was whether a consulting engineer owned a duty of care to the subsequent owner of a warehouse which was found to suffer from substantial structural distress. There was no evidence that the subsequent purchaser could not protect itself, but rather that it had not done anything to protect itself (no warranty from the vendor obtained about the structural integrity of the building, no assignment of the vendor’s rights against the builder, no pre-purchase inspection). The capacity of a party to protect themselves from damage by contractual means was said to be one – but often a decisive – reason for rejecting the existence of a duty of care in tort for cases of economic loss. (c) In Brookfield Multiplex Ltd v Owners Corporation Strata Plan [2014] HCA 36 (‘Brookfield’) the NSW Court of Appeal had held that Brookfield as the builder which had contracted with a developer to design and construct a strata-titled serviced apartment building owed a duty to exercise reasonable care in the construction of the building to avoid causing the subsequent body corporate to 20 Canavan v Sutton [2020] QCAT 374 at paragraph [44]. 21 Graham Barclay Oysters Pty Ltd v Ryan [2002] HCA 54 at [149]. 22 Aquatec-Maxcon Pty Ltd v Barwon Region Water Authority (No 2) [2006] VSC 117 at [267]. -- 12 of 16 -- 13 suffer economic loss because of latent defects in the common property. On appeal, the High Court of Australia found that where: (i) Brookfield had negotiated a sophisticated contract with the developer including detailed provisions for dealing with defects and limiting liability; and (ii) the standard form contract of sale to purchasers of the serviced apartments conferred on each subsequent purchaser of the units’ specific contractual rights against the developer in relation to defects in the property for a specified period of time, there was no duty of care to avoid pure economic loss flowing from latent defects owed by Brookfield to the developer or to the subsequent owners of each of the apartments. The High Court in Brookfield also found that there was no independent duty of care owed to the body corporate, distinguishing Bryan because the subsequent purchasers and the body corporate did not suffer from the same vulnerability as the original owner or subsequent purchasers in Bryan. Specifically, the existence of contracts that expressly provided for the promised quality of works and the consequences of failure to meet it demonstrated that the parties had the ability to protect their own interests against the consequences of defective work. (d) In McSwan & Anor v Weaver [2023] QCAT 148, applying Woolcock and Brookfield, the Tribunal found that in circumstances where the owners failed to protect themselves by reducing their agreement with the builder to writing, which would have provided them with the benefit of statutory warranties, there was no duty of care for pure economic loss. Highlife say that: (a) The Body Corporate and its lot owners had contracts with Wilkinson, not Highlife. The communication they had with Wilkinson, pre and post settlement of their contracts is in evidence. Highlife handed over the project to Wilkinson who then went on to settle the contracts, after Wilkinson, for a time, controlled the Body Corporate. (b) Wilkinson when acting as the Body Corporate did not enforce rights under its contract with Highlife because it does not consider the contract to have been breached. (c) Vulnerability to the Brookfield standard requires a party to be incapable of protecting themselves, and it was up the lot owners to do their own inspections and pursue their contractual rights arising from them, if any, against Wilkinson. The Body Corporate submit that Brookfield is distinguished from their situation because: (a) the chain of events in the lead up to the discovery of defects was different, (b) the parties involved were different, and (c) the terms of the contracts between parties were different. In this case: -- 13 of 16 -- 14 (a) The lot owners purchased ‘off the plan’ knowing that Wilkinson was not the builder and that a builder had been engaged by Wilkinson to construct the property according to the disclosed plans and specifications. (b) The sale prices, exceeding $800,000 were not modest – the van der Kwasts gave evidence that they had “paid good money” for the properties – this attributes a level of sophistication to the buyers. (c) The lot owners were legally represented in the purchases although it is not known which lot owners had advice on the contracts before the signed them and what the nature of that advice was, if sought. Certainly, they had an opportunity prior to signing their purchase contracts to seek advice, to ask to see the building contract between Wilkinson and Highlife and to negotiate terms. (d) The lot owners were aware, from the plans and body corporate disclosures, that the construction of the building involved the creation of a body corporate, common property, and a scheme to manage that. (e) The lot owners were aware that building defects were a risk, because their contracts made provision for a process to follow upon discovery of defective building work in their lots. (f) The lot owners could have, but did not, negotiate similar protections for defects in the building work to common property, despite knowing that clause 7.6 of the contract applied only to their lot and not to common property, and despite having been referred to implied warranties in section 223 of the BCCMA which ought to have turned the buyers’ minds to seeking extended warranties to protect them. (g) Nothing in their contract with Wilkinson assigned Wilkinson’s rights under the building contract to the lot owners or to the Body Corporate and this too ought to have been considered and addressed in the terms of their contract. The QBCC decided not to direct Highlife to rectify the defects. The reason given for their refusal was because the defects were noticed before the settlement and purchase of the lots. Unlike cases like Bryan where the defect was latent and undiscoverable by inspection, the driveway and concreting defects identified as defective building works were not latent and each lot owner settled their lot purchased with actual notice of the common property defects. The Body Corporate existed prior to settlement of the sale contracts. Under the control of Mr Wilkinson, it was happy with the standard of the building works. The Body Corporate under the subsequent control of the purchasing lot owners was not. I am bound to adopt the High Court’s view in Woolcock and Brookfield that it is the capacity of a party to protect themselves from damage by contractual means that defines vulnerability and not what it did do that is relevant. The current case is not distinguished from Brookfield and is in fact analogous to it. This factor weighs heavily against a finding that Highlife owed the Body Corporate a duty of care. -- 14 of 16 -- 15 Salient factor: The harm suffered Parts of the driveway and pathways are not acceptable to the Body Corporate in appearance and finish, but the experts agree that: (a) the driveway is fit for purpose, (b) the driveway is unlikely to result in a safety hazard, (c) the missing isolation joint, if it is missing, is not a requirement under the Building Code of Australia, (d) the driveway is in good structural condition, and (e) the cosmetic defects are not likely to impact the durability of the driveway. The Body Corporate in closing submissions disagreed with their expert and insisted that the driveway is not fit for purpose, the defects are not merely cosmetic and the defects the durability and the safety of the driveway. Given their independence, their overriding obligation to assist the Tribunal23 and their relevant experience, I accept the evidence of Mr Ferris and Mr Carpenter and find that the defect is cosmetic in nature only, and that the driveway is fit for purpose, not unsafe, durable and in a good structural condition. The minor, cosmetic nature of the ‘harm’ does not weigh in favour of finding a duty of care exists. Salient factor: Assumption of liability and known reliance upon skills In Bryan it was noted that “by virtue of superior knowledge, skill and experience in the construction of houses, it is likely that a builder will be better qualified and positioned to avoid, evaluate and guard against the financial risk posted by latent defects in the structure of a house”.24 Importantly, the current circumstances are distinguished because the defects were not latent – the buyers purchased with actual knowledge of the defects, and they were obvious almost immediately after the poured concrete set. They also entered off-the- plan contracts with capacity to negotiate terms to specifically address the foreseeable risk of common property building defects. These factors weigh against a finding that Highlife assumed liability to, or knowledge that subsequent owners would rely upon its skills as a builder, as opposed to contractual rights they had, or could have negotiated with Wilkinson. Salient factor: Relationship of proximity between the parties The Court in Bryan was satisfied that the connection between a builder and a subsequent owner of a property – whilst it may be limited only to the “house itself”25 – nonetheless was marked by proximity in several respects, noting that: The connecting link of the house is a substantial one. It is a permanent structure to be used indefinitely and, in this country, is likely to represent one of the most 23 Practice Direction 4 of 2009: Expert Evidence. 24 At [19] per Mason CJ, Deane and Gaudron JJ. 25 Ibid at [16] per Mason CJ, Deane and Gaudron JJ. -- 15 of 16 -- 16 significant, and possibly the most significant, investment which the subsequent owner will make during his or her lifetime. When…economic loss is eventually sustained and there is no intervening negligence or other causative event, the causal proximity between the loss and the builder’s lack of reasonable care is unextinguished by either lapse of time or change of ownership.26 There might be, on that basis, to be a relationship of proximity between the parties to this proceeding that weighs in favour of a finding of duty of care, but for the reference to “intervening negligence” in the nature of the buyers failing to secure contractual terms protecting themselves against the risk. Salient factor: Indeterminacy of liability As suggested in Bryan several policy considerations may mitigate against the finding of a duty of care where the loss is economic and in particular: …the law’s concern to avoid the imposition of liability “in an indeterminate amount for an indeterminate time to an indeterminate class”.27 It was also noted by Justice Toohey that: ..particularly in the area of non-dangerous defects...as time goes on it may be more difficult to show that the defect was the result of negligence and not of wear and tear or factors not associated with the standard of construction.28 These factors weigh against a finding that the Body Corporate is owed a duty of care by Highlife. Decision I am not satisfied, applying Woolcock and Brookfield and considering the salient factors relevant to these parties – placing particular weight on the issue of vulnerability (or lack thereof) – that Highlife owed the Body Corporate a duty of care to protect it from economic loss and I find, accordingly, that it did not. As this is a necessary cornerstone to a finding of negligence, the application must fail. Costs Section 77(3)(h) of the QBCC Act empowers the tribunal to award costs in building disputes, displacing the usual position in tribunal proceedings that each party bear their own costs.29 Having said that, the applicant was the only party to apply for costs and their application has not succeeded. To that end, unless an application for costs is made and a decision made awarding costs pursuant to directions, there will be no order as to costs in this proceeding. 26 Ibid. 27 At [7] per Mason CJ, Deane and Gaudron JJ citing Ultramares Corporation v Touche (1931) 174 NE 441 at 444 per Cardozo CJ. 28 At [28]. 29 Section 100, Queensland Civil and Administrative Tribunal Act 2009 (Qld). -- 16 of 16 --