Academic journal article Melbourne University Law Review

Negligence Claims by Subsequent Building Owners: Did the Life of Bryan End Too Soon?

Academic journal article Melbourne University Law Review

Negligence Claims by Subsequent Building Owners: Did the Life of Bryan End Too Soon?

Article excerpt

CONTENTS  I Introduction  II Multiplex: An Apartment Building Comes to the High Court     A Case History     B Contract Trumps Tort     C The Court's Assumptions       1 Multiplex Is a Conventional Pure Economic Loss Case       2 Contractual Protection Is Available       3 Legislative Protection Suffices  III Current and Future Judicial Practice in Australia: Negligence Corralled     A Post-Multiplex Cases     B English Experience Post-Murphy  IV Criticisms of the Assumptions Underpinning Multiplex     A Pure Economic Loss       1 The Physical Origins of the Harm       2 Indeterminacy Is Less Relevant      B Contractual Protection       1 Contracts with the Vendor       2 Contracts with Third Parties      C Legislative Protection  V Conclusion 


The dispute which led to the High Court of Australia's decision in Brookfield Multiplex Ltd v Owners Corporation Strata Plan No 61288 (1) ('Multiplex') (2) reflects a situation commonly encountered in construction projects. (3) It is one which is especially important given the proliferation of multi-use, multistorey developments around Australian population centres. (4) A builder constructs a building under a contract with the first owner (typically, a developer). The first owner transfers the building to a second owner (or owners). (5) This chain may go on for years. At each stage, there is a risk that one of those subsequent purchasers might discover latent defects in the building which dramatically reduce its value.

The question in Multiplex was specific: whether the builder of an apartment complex owes a duty of care in negligence to protect the Owners Corporation (as agent for the owners of apartments in the building) from pure economic loss arising from latent defects in the common property of that building where those defects were structural, constituted a danger to persons or property, or made the apartments uninhabitable. The High Court of Australia found that the builder owed no such duty. In doing so, the Court overturned the decision of the New South Wales Court of Appeal (6) and restored the decision of McDougall J at trial. (7)

This result may be surprising to those not well versed in construction law. However, the decision reflects the trend in Australian law over the past two decades to reverse the expansion of duties of care in negligence, and to leave the question of liability to contract or legislative schemes. (8) In essence, it brings the Australian common law into line with the limited province of tort expressed in the House of Lords by Oliver LJ in Murphy v Brentwood District Council more than 25 years ago:

   I am able to see no circumstances from which there can be deduced a    relationship of proximity such as to render the builder liable in    tort for pure pecuniary damage sustained by a derivative owner with    whom he has no contractual or other relationship. (9) 

Thus, Multiplex offers a clear message that those outside the safety net of consumer protection legislation must insist on contractual protection. However, as we argue in this article, the Court's approach is based on flawed assumptions that subsequent purchaser cases should be subject to the caution appropriate in conventional pure economic loss cases, and that there is sufficient legal protection available to building owners through contractual negotiation or legislation.

The article also engages with the broader issue of the evolution of protection of economic interests through tort in Australia. In Multiplex, the High Court reiterated 'the primacy of the law of contract in the protection afforded by the common law against unintended harm to economic interests where the particular harm consists of disappointed expectations under a contract'. (10) The interaction between contract and tort and the status of vulnerability as one of the 'salient features' in determining whether a duty is owed (11) is especially important, yet--as Meghan De Pinto-Smith has recently noted--the subject of limited commentary. …

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