Proportionate Liability and Statutory Warranties under the Home Building Act Owners Corporation SP 72357 v Dasco Constructions Pty Ltd [2010] NSWSC 819

By Robert Riddell and Bruce Hale of Gadens Lawyers, Sydney

One of the first things a bricklayer is told when starting his apprenticeship is that when making mortar, the correct proportion of components is essential.  Proportions of liability are the legal equivalent and are an equally important consideration to those contemplating litigation.

Proportionate liability as a doctrine has been the saviour of many and the scourge of others.  In its purest sense, it is a logical concept that makes the wrongdoer accountable for only its share of the blame for the consequences of a failure to take reasonable care.  In a practical sense, it can be supremely frustrating to a plaintiff and escalate the time and costs involved in litigation.

Owners Corporation SP 72357 v Dasco Constructions Pty Ltd [2010] NSWSC 819 (Dasco's case) is an example of proportionate liability coming to the rescue, from the builder's perspective that is!  Dasco's case involved a claim by an Owners Corporation against a builder for breaches of the statutory warranties under the Home Building Act 1989 (NSW) (HBA).  The builder's defence included a ground that the principles of proportionate liability should apply, i.e. a proportion of the liability should be borne by the subcontractors.  The plaintiff responded seeking an order that this response be struck out.

The question arose as to whether the proportionate liability provisions of the Civil Liability Act 2002 (NSW) (CLA) apply to claims for a breach of a statutory warranty implied by the HBA?  Up until the date of this decision, it had been assumed by many that proportionate liability provisions had no application to breaches of the statutory warranties.

Proportionate liability

Part 4 of the CLA sets out the regime for proportionate liability and defines the qualification requirements for 'apportionable claims'.  Under section 34 of the CLA, an apportionable claim is a claim for economic loss or damage to property in an action for damages arising from a failure to take reasonable care, not including any claim arising out of a personal injury.

Proportionate liability allows for liability to be allocated to concurrent wrongdoers in accordance with their level of liability for the wrongful act and resulting damages.  Where a defendant is of the view that others contributed to loss, the CLA entitles the defendant to have its liability limited to the proportion of the loss for which it is found to be responsible.

Statutory warranties

Under Part 2C of the HBA, statutory warranties are implied into every contract for residential building work.  This allows for an action for breach of contract and warranty to be brought against the offending contractors.  A question arose in Dasco's case as to whether the doctrine of proportionate liability applies to claims for breach of an implied statutory warranty by a successor in title (here, the Owners Corporation) to the owner with whom the builder contracted.

Einstein J concluded that the defence of proportionate liability as provided in the CLA can be available to those defending claims brought under Part 2C of the HBA.  He applied 'the ordinary and natural meaning' of the legislation in determining the legislative intention of section 18D of the HBA.

The decision in Dasco's case leaves open the possibility of the proportionate liability provisions ameliorating the impact of the statutory warranties on builders, provided the homeowner (or owners corporation) prosecuting the claim is not a party to the building contract.

Although not the subject of Dasco's case, the legislation also has the potential to significantly reduce developers' exposure to statutory warranty claims, particularly given that it is unlikely the developer performed much of the work.  The question also arises as to whether it will provide an answer, at least in part, to claims by home warranty insurers seeking reimbursement for insurance claims paid out.

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