Sydney Strata Corporation Survives First Challenge to Defect Claim

The NSW Supreme Court recently considered an application by a builder to summarily dismiss a defect claim before the case got seriously underway.

Fortunately, the Court didn’t dismiss the claim so the case can now proceed.

But, how and why did this happen?  Well the story goes something like this.

The strata corporation relates to buildings in Hornsby, NSW that were built between March and December 2001 by Laing O'Rourke and have defects.  In February 2003 cracks were discovered in the buildings and reported by two different consultants to the strata corporation.

It wasn’t until 27  November 2008 that legal action began in the NSW Consumer Trader & Tenancy Tribunal in which claims were made for Home Building Act breaches and negligent construction.  During 2009 it became clear that the claims were for more than $500,000 so the legal action was transferred to the NSW Supreme Court and updated court documents were filed on 29 January 2010.

At that stage the builder learned of the February 2003 reports of cracking and said that the strata corporation was out of time to sue it relying on the Cyril Smith case decided in July 2011. 

The builder argued that –

• The Home Building Act gives strata corporations 7 years from building completion to start legal action
• Under negligence laws strata corporations have 6 years from when defects are ‘manifest’ to start legal action
• So the strata corporation had to start action by 31 December 2008 (under the Home Building Act) or 27 February 2009 (in negligence)
• It’s CTTT action was not effective because it had simply described its claim as ‘for defective work in the construction of the premises
• Since the properly detailed Supreme Court claim was not filed until January 2010 it was out of time on both bases

Fortunately for the strata corporation the NSW Supreme Court did not agree with the builder.

Firstly, the Court said that it’s not generally appropriate to dismiss actions at preliminary stages for these reasons (rather than at a full hearing) and it should take a strict approach on things.

Secondly, the Court said the CTTT claim was adequate to start the legal actions and did not need the more detailed Supreme Court action.

Thirdly, the Court said that there was not enough evidence to be convinced that the defects had actually become ‘manifest’ (in the legal sense) more than 6 years earlier.

And finally, the Court said that the strata corporations claim included more than just cracking defects so it could proceed on the other matters regardless of the builder’s argument.

That doesn’t mean the argument about time limits has gone away completely and it’s likely the builder will argue it again at the hearing on at least some of the defects.  But, Strata Scheme 67202 has overcome a strategic challenges and can now run its defects case.  Well done!

The case reference is The Owners Strata Plan 67202 v Laing O’Rourke (BMC) Limited [2011] NSWSC 939 if you want to read the decision. 

Francesco Andreone