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“Catch 22” – Don’t get caught out taking responsibility for building defects

This article is aimed primarily at developers and homeowners as what I am about to explain represents a risk for them when engaging in residential building work. However, if you are a builder this article may assist you in defending some defects, and if you are an owners corporation, this article may assist you in understanding the demarcation of liability between the builder and the developer in relation to defects.

First of all, for those of you who may not know, a “catch-22” is “a paradoxical situation from which an individual cannot escape because of contradictory rules or limitations”. The term was coined by Joseph Heller, who used it in his 1961 novel Catch-22.

If you are a developer, consider this question:

,You are part way through a residential build. The builder hands you a variation. It states that if he is to build in accordance with the plans there is an issue regarding fire safety. He has a fire engineering report to back it up. The report states that the issue may be resolved with a slight modification to the design. However, the variation contains a disclaimer that the design modification which is proposed in the report may result in other issues, such as water penetration issues. The builder asks whether you want to approve the variation or continue with the original design.

The fire safety issue is a definite issue. However, the water penetration is a potential issue. Which way do you go?

The answer is that neither option is advisable. A solution needs to be found which does not result in any issues.

Section 18F of the Home Building Act 1989 provides that:

,(1) In proceedings for a breach of a statutory warranty, it is a defence for the defendant to prove that the deficiencies of which the plaintiff complains arise from:

,(a) instructions given by the person for whom the work was contracted to be done contrary to the advice of the defendant or person who did the work, being advice given in writing before the work was done.

Going back to the example above, if, as a developer, you had opted to go with the potential water penetration issue, should that issue actually arise within 6 years from the issue of the occupation certificate it is quite likely that the builder would seek to defend it on the basis that Section 18F applies. The builder may also make a cross-claim against you and would based upon the report and advice provided in the variation.

Whether the builder is successful in defending the issue would depend upon numerous factors, such as the contents of reports and information provided by the builder, the relevant correspondence between the parties and how these documents are applied to the test in Section 18F.

Legal fees will invariably be incurred dealing with the issue and if it is a significant issue it could become a major impediment to reaching a settlement. It is always advantageous to obtain legal advice when the issues arises as opposed hoping that the issue will not materialise down the track. If the issue is addressed at the time it arises it is usually much easier to have the issue resolved by those responsible for its design.

The information provided in this article is general information only and should not be relied upon as legal advice or be used as a substitute for obtaining legal advice. The specific circumstances relating to you impact upon your legal rights and obligations and personal legal advice based upon your circumstances should be obtained. This area of law changes frequently and the law may have changed after the time this article was prepared, up-to-date legal advice should be obtained. Please do not hesitate to contact Williamson Lawyers if we may be of assistance.

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