Theory and speculation about how statutory warranties given by builders to owners under section 8 of the Domestic Building Contracts Act 1995 (Vic) operate in conjunction with the proportionate liability regime under Part IVAA of the Wrongs Act 1958 (Vic) have been further resolved by the decision in the recent VCAT case of Owners Corporation PS623721 and ors v Shangri-La Construction Pty Ltd and ors [2022] VCAT 1499.
Background
In that case, alleged defects in an apartment development in Brighton led to apartment owners and the Owners Corporation making claims against the design & construct builder and a further nine respondents. There were also five joined parties in the proceeding. The builder made claims against its professional indemnity insurers, whose outcome is to be dealt with in a separate judgment.
The owners’ claims against the builder included allegations of breach of the warranties in section 8(a) (that work will be carried out in a proper and workmanlike manner and in accordance with the plans and specifications) and section 8(d) (that work will be carried out with reasonable care and skill and completed by the date for completion), as well as claims in negligence.
Claims for damages “arising from a failure to take reasonable care” are the touchstone of an apportionable claim under the Wrongs Act.
Findings
Member Edquist reviewed Part IVAA of the Wrongs Act, and contrasted the different section 8 warranties pleaded selectively in the Lacrosse1 case, and held that:
- the first limb of section 8(a) – that work will be carried out in a proper and workmanlike manner – gives rise to liability that may be apportionable; and
- the first limb of section 8(d) – that work will be carried out with reasonable care and skill – gives rise to liability that may be apportionable.
Member Edquist also made a finding in relation to the warranty in section 8(e) (that the home be suitable for occupation at the time the work is completed) despite ambiguity about whether the owners pleaded a claim under that section. On review of other authorities and on the basis of principle, the Member found that the warranty arising under section 8(e) is absolute.
In obiter dicta (without needing to determine this), the Member also found that the second limb of section 8(a) (that work will be carried out in accordance with the plans and specifications) and the second limb of section 8(d) (that work will be completed by the date for completion) were each absolute in nature.
In using the term “absolute” to describe certain of the section 8 warranties, Member Edquist has followed the approach taken in argument and ultimately in the VCAT decision in the Lacrosse case, undisturbed on appeal by the Court of Appeal. In that case, the warranties in section 8(b), (c) and (f) were found to be absolute, not qualified by a duty to take reasonable care and were not apportionable.
Key takeaway
The decisions in Shangri-La Construction and Lacrosse together confirm that of all the section 8 warranties, those that have been found to be amenable to proportionate liability claims are:
- the first limb of section 8(a) – that work will be carried out in a proper and workmanlike manner; and
- the first limb of section 8(d) – that work will be carried out with reasonable care and skill.
Although that position is the law in Victoria at this time, it remains to be seen whether that is the final word on the question of the interaction of the “heart” of many domestic building cases – the section 8 warranties – and proportionate liability under Victorian law.
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1Owners Corporation No. of PS613436T v LU Simon Builders Pty Ltd [2019] VCAT 286
