Facts
The appellant, the owners corporation of the 28-storey “The Rise” building in Parramatta, brought an action against JKN Para 1 Pty Ltd (JKN), the developer and former owner of the building, and Toplace Pty Ltd (Toplace), who was contracted by JKN to design and construct the building.
The appellant claimed the installation of aluminium composite panels on the external cladding breached warranties in the Home Building Act 1989 (NSW) (HBA) and sought rectification damages for the cost of replacing the cladding. The alleged breaches were that:
- The cladding did not comply with the HBA or ‘any other law’, which includes the Building Code of Australia (BCA), breaching HBA s 18B(1)(c) (Alleged Breach 1);
- The cladding was comprised of a material that was not good and suitable as it was combustible, breaching HBA s 18(1)(b) (Alleged Breach 2); and
- The dwellings were not reasonably fit for occupation because they are combustible, breaching HBA s 18(1)(e) (Alleged Breach 3).
Both the appellant and the respondent agreed that “The Rise” required the “most fire-resistant” level of construction. Compliance with this could be through the deemed-to-satisfy provisions or through an alternative solution (or a combination of both). Both the appellant and the respondent also agreed that the building did not comply through the deemed-to-satisfy provisions and that no alternative solution complying with the BCA requirements at least equivalent to the deemed-to-satisfy provisions was prepared prior to the issuing of the construction certificate.
However, the primary judge held that the appellant did not establish a breach of any statutory warranty. The Court held that the appellant had the onus of proving that an alternative solution would comply with the BCA. With regards to Alleged Breach 1, while an alternative solution complying with the BCA requirements was ‘strictly’ not prepared before the issuing of the construction certificate, the appellant’s evidence could not affirmatively establish whether an alternative solution would comply with the BCA. With regards to Alleged Breach 2 and 3, the Court held that it had not been established through an AS1530.1 test that the cladding was combustible within the meaning of the BCA.
The primary judge further held that even if there was a breach of a statutory warranty, an award for rectification works at substantial cost would not be proportionate to any benefit obtained and would not be reasonable as the only breach of the BCA which the appellants would have established was the failure to perform an alternative solution at the relevant time, the appellants did not establish that an alternative solution could not be performed and the appellants did not establish that the cladding was combustible within the meaning of the BCA.
Breach of Statutory Duty Issue
Both parties accepted on appeal that the trial judge clearly erred in finding that Alleged Breach 1 did not occur. The building clearly did not comply with the performance requirements in the BCA as the cladding did not comply with the deemed-to-satisfy provisions and no alternative solution equivalent to the deemed-to-satisfy provisions was prepared prior to the issue of the construction certificate.
Loss and Damage Issue
Where a plaintiff has suffered loss due to a defective building, the plaintiff is generally entitled to reinstatement costs, and not merely the diminution in value of the defective building, if the work undertaken is necessary and a reasonable course to adopt: Bellgrove v Eldridge (1954) 90 CLR 613.
While the burden of proving loss lies with the claimant, the defendant has at least an evidentiary onus to displace the prima facie rule for assessing damages as reinstatement costs. The respondent had an evidentiary onus to show that the work proposed in mitigation was unreasonable.
The trial judge erred in finding that the appellants had an onus to prove that an alternative solution could not be performed after establishing that the respondents did not comply with the BCA. On the evidence submitted by the respondents at trial, the respondents did not show that an alternative solution, functionally equivalent to the BCA deemed-to-satisfy provisions, was available. Further, the Court held that the appellants did not concede the issue of onus proof at trial.
Outcome of the Appeal
The appeal was allowed. Due to the above issues being dispositive of the appeal, the Court believed that it was not appropriate to consider the other grounds of appeal, including whether Alleged Breach 2 or 3 occurred.
A copy of the full judgment can be found here.
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The information contained in this article is general information only and not legal advice. The currency, accuracy and completeness of this article (and its contents) should be checked by obtaining independent legal advice before you take any action or otherwise rely upon its contents in any way.
Contributors: Harry Chen
