Legal implications for owners

A recent High Court decision could have implications for strata communities Australia-wide.

On October 8, the High Court of Australia found that Brookfield Multiplex did not owe a duty of care to the owners’ corporation (OC) of a Chatswood apartment tower.

Brookfield built the tower in 1998 and in 2008 the building’s OC brought proceedings in the Supreme Court of NSW, alleging defects existed in the common property of the serviced apartments.

The developer of the building had sold the apartments to various owners, and all apartments were then leased to hotel operator, Park Hotel Management Pty Ltd, which used them to operate a serviced apartment hotel, with the hotel management effectively controlling the OC.

According to Strata Title Lawyers’ Tom Bacon, the High Court found that the nature and content of the contractual arrangements, the sophistication of the parties and the relationship of the developer to the OC “all militate against the existence of an asserted duty of care to either the owners’ corporation or the developer.”

He said the case could have implications for residential buildings and OCs.

“The decision suggests that a builder would not owe a duty of care to an owners’ corporation of a residential strata scheme if vulnerability could not be established,” Mr Bacon said.

He said in Brookfield’s case, the vulnerability of the OC could not be established.

“In coming to this decision the High Court made references to the general rule of common law that damages for economic loss which are not consequential upon damage to person’s property are not recoverable in negligence even if the loss is foreseeable.”

“The High Court focused on the vulnerability of the parties to ascertain if the owners’ corporation could fall within the parameters of an exception to this rule.”

“As the developer was the original owner of the apartments and was not vulnerable, the owners’ corporation could also not be vulnerable.”