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Reinhardt, Greg --- "Duty of care owed by builders" [1997] LawIJV 19; (1997) 71(1) The Law Institute Journal 49

SUPREME COURT JUDGMENTS

Duty of care owed by builders

by GREG REINHARDT

 Zumpano v Montagnese (unreported, 3 October 1996, No 5160/1994, Brooking, Tadgell and Phillips JJA).

In this case the Court of Appeal considered the scope of the duty of care owed by builders to subsequent owners recognised by the High Court in Bryan v Maloney (1995) 182 CLR 609.

Brooking JA noted that the significance of the High Court's decision might be diminished in Victoria by the Domestic Building Contracts and Tribunal Act 1995 (Vic). Section 8 of that Act imports warranties into "domestic building con-tracts" which cannot be excluded (see s132). The statute, where applicable, might not coexist with a common law duty of care.

The case before the Court preceded the statute.

A plumber engaged as an independent contractor by the appellants, the builders of a house on land owned by them by the Darebin Creek, had failed to install a boundary trap in the sewerage system when the house was built in 1985. The appellants built the house for their own use. The respondents purchased the house from the appellants in October 1986 and took possession in February 1987. The respondents learned of the non-installation of the trap in December 1991. They sued the appellants for dam-ages. They recovered damages in the Magistrates' Court of $860, the cost of installing the missing trap and the reinstatement of landscaping.

Brooking JA identified some twelve questions arising as to the scope of Bryan v Maloney. I shall list them without further elaboration as to the various matters which arise with regard to each identified quest-ion and which are spelled out in His Honour's judgment:

1. What kinds of building fall

within the decision?

2. Is the decision confined to cases where the builder erected the house under a contract?

3. Leaving aside the question whether the decision is con-fined to subsequent purchases of houses built under contract, does it apply to all purchases of dwellings, regardless of the occupation, intentions and conduct of the purchaser?

4. Is the duty owed not only to purchasers but also to mere occupiers?

5. To which "builders" does the decision apply? For example, does it apply only to professional builders?

6. To what "defects" does Bryan v Maloney apply? It is evidently confined to latent defects. Is it limited to "major" or "serious" defects?

7. Related to 6, how is one to determine whether there has been negligence in fact? The question is whether the existence of the "defect" establishes lack of reason-able care on the part of the builder.

8. What is the significance of reliance for the purposes of Bryan v Maloney? Is proximity to be established by a general reliance and assumption of responsibility rather than proof of specific reliance on the builder's skill? Brooking JA indicated his dissatisfaction with the decision in this respect, and perhaps more generally, suggesting that the High Court might reconsider Bryan v Maloney at some stage.

9. What are the circumstances which attend the relation-ship of builder and subsequent owner?

10.What is the significance of the terms of the contract where the dwelling was erected under contract?

11.What is the position where the defect results from negligence on the part of a sub-contractor or supplier?

12.Is there legislation which bears on the question of whether the duty of care should be imposed? The legislation in force at the time of the sale to the Montagneses was Division IA of Part XLIX of the Local Government Act 1958 (Vic). It was at least arguable that, notwithstanding s918S of that Act (and see s31 of the House Contracts Guarantee Act 1987 (Vic)), the builder of a house in Victoria should not be subject to the duty of care recognised in Bryan v Maloney. There was no like legislation in Tasmania where that case had its origin.

Brooking JA's examination of these questions pays careful reading.

The decision

It was argued for the respondents that the duty of care arose, notwithstanding the fact that the house had been built by the appellants for their own use. Alternatively, it was argued that the duty arose be

cause the house had been sold as a "builder's own home".

Brooking JA took the view that four of the High Court justices had treated the duty of care as one which arose out of the fact that the house had been erected by the builder under a contract with the original building owner; the duty then extended to persons who bought from the original owner. The duty should be so confined: cf Municipality of Woollahra v Sved (1996) Aust Torts Reports 81-398 (a decision of the NSW Court of Appeal).

As to the respondents' alter-native argument - whether the house was sold as a "builder's own home" - the duty of care recognised in Bryan v Maloney is a duty owed to purchasers. On the alternative submission of counsel for the respondents, the duty should be confined to some lesser group of persons, namely persons who buy the house as a "builder's own house". The duty would exist by virtue of advertisement of the sale of the house in this way, an entirely artificial matter. The class should not be confined in this way.

Accordingly, His Honour held that there was no duty of care. Moreover, breach could not be established. The duty recognised in Bryan v Maloney is subject to two limitations: the defect in question must be a structural one (that was not the case here) and it must reduce the value of the house (there was no express evidence of this). The appellants could not be held liable for the plumbing work carried out by the in-dependent contractor; there was nothing on the facts of the case to make the builder liable for the work of the plumber as part of the builder's overall function, nor could it be said that the plumbing work was part of some non-delegable duty so that the appellants remained liable for it.

Tadgell and Phillips JJA agreed with Brooking JA. They preferred, however, to rest their conclusion on the basis that it was not open to the magistrate to find any negligence on the part of the appellants.

Liability of carrier by sea - limitation of actions.

 Anglo Irish Beef Processors International v Federated Stevedores Geelong (A Firm) and others (unreported, 3 October 1996, No 4749/1989, Brooking, Phillips and Charles JJA).

The question before the Court of Appeal was whether a plain-tiff was entitled to amend its proceeding to add a claim in contract to a claim in tort not-withstanding the one year time bar under the Hague Rules (see Sea-carriage of Goods Act 1924 (Cth) s4 and Hague Rules Article III rule 6).

The plaintiff/appellant brought proceedings for loss and damage caused by fire to a cargo of goods against, inter alia, the owner or demise charterer of the vessel chartered by the appellant to convey the goods from the Port of Geelong to the Port of Aqaba in Jordan. The proceedings against the relevant defendant were pleaded in tort. The appellant sought leave to amend its proceeding after the one year time bar imposed by the Hague Rules to allege an alternative claim for breach of contract (the amendment was inspired by the defendant's defence which sought to rely on various contractual matters by way of defence).

Phillips JA referred to the provisions of s34 of the Limitation of Actions Act 1958 (Vic) and RSC 36.01(6). Section 34 abrogates the old rule of practice in Weldon v Neal (1887) 19 QBD 394. That rule prevented a court from giving leave to add a cause of action which had become statute-barred since the commencement of the act-ion. The effect of an amendment to pleadings between existing parties, once effected, relates back to the commencement of the proceeding, at least in Australia. Prior to the abrogation of Weldon v Neal, the court would not, as a matter of practice, give leave to amend where the effect of the amendment would be to revive a claim which had become statute-barred since the commencement of the action.

His Honour did not deter-mine the argument whether s34 extended to claims in respect of which the relevant time bar derived from contract rather than statute. In Keller v Bayside City Council [1996] 1 VR 356, 375, Batt J was of the view that s34 should be con-fined to claims barred by Part I of the Limitation of Actions Act 1958 (Vic). Nor did Phillips JA determine the question whether s34 can apply to a time bar which not only bars the remedy, but which extinguishes the right. No doubt those matters will be deter-mined on another day.

Phillips JA decided the case on the basis of Article III rule 6 of the Hague Rules. The argument was whether the appellant had brought "suit" within the one year period prescribed by the rule. Originally, counsel for the appellant conceded that suit had not been brought with-in the one year period. That concession was subsequently withdrawn.

It was common ground that the appellant's claim in tort had been brought within the one year period. Suit in respect of the loss and damage had been brought within one year and this was broad enough to comprehend any claim in tort or contract notwithstanding passages in some of the English cases (and in New South Wales). Article III rule 6 of the Hague-Visby Rules makes this even plainer, but this should not be treated as a point of distinction.

His Honour rejected an argument that, in order to avoid the time bar, suit must be brought against the carrier "in that capacity"; that is, a capacity which necessarily depends on contract. The Hague Rules clearly contemplate a claim in tort as well as contract where there is a contract between the parties. The rules do not apply where there is no contract to which the rules apply. This suggests that whether "suit" has been brought in Article III rule 6 should not depend on the question in what capacity the defendant carrier is sued.

The appellant's claim had been brought within time and it was not necessary to have further regard to Article III rule 6 in determining whether leave to amend should be given.

Recovery of debt by liquidator.

 Avamure Pty Ltd (In Liquidation) v Fletcher Jones & Staff Pty Ltd (unreported, 3 September 1996, No 6690/1995, Tadgell and Callaway JJA).

The Court of Appeal rejected an argument that, on the winding up of a company, debt recovery proceedings by the company are civil matters arising under the Corporations Law which must be brought in the Supreme or Federal Courts and not the County Court (see Churcher v Edwardstown Carpets (Reg) [1993] SASC 3897; (1992) 60 SASR 503). Proceedings for recovery of debt are properly brought in the name of the company in liquidation; claims for recovery of unfair preference or other void-able dispositions are properly brought in the name of the liquidator.

Readers should note that since 16 October 1995 the County and Magistrates' Courts have had jurisdiction to hear civil matters arising under the Corporations Law, including claims for recovery of unfair preferences: see Corporations Legislation Amendment Act 1994 (Act No 104 of 1994).

Greg Reinhardt is a senior lecturer in law at the University of Melbourne.