Council & Certifier liable to subsequent Owners

Moorabool Shire Council v Taitapanui 2006 VSCA 30

Introduction

Watson Constructions (in liquidation) designed and built a home on its own land in Torquay.  The Moorabool Shire Council approved the house plans through its private certifier, Mr Mellis.  Watson sold the home to the Pozmans.  Eighteen months later, they sold it to Mr & Mrs Taitapanui. Within a few months, the Taitapanuis began to notice defects.  Rain falling on the balcony leaked into the downstairs area, water leaked from above French doors, and tiles began to lift.  They sought expert advice but in the meantime Watson Constructions had ceased trading.

The home

The land contained highly reactive clay and was classified “H”.  The home was a two storey construction, with the lower floor being clad with CSR Hebel Powerpanel.  The CSR Powerpanel user’s guide requires builders to, as a minimum, comply with conventional masonry veneer construction as specified in AS2870.  The minimum requirement under AS2870 for masonry veneer on a “H” site is a reinforced concrete perimeter strip footing.

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Contrary to this requirement, the home was constructed using stumps on sole plates.  The expert told the Taitapanuis that this footing system was entirely inappropriate to support Powerpanel walls.  He said that the house would need to be demolished and rebuilt as rectification work would not be possible.  He said that the problems would only continue to get worse.

The claims start

The Taitapanuis claimed on the Home Owners Indemnity scheme.  The insurer accepted liability but disputed the quantum of the claim, suggesting that the house could be reclad with Hardieplank or similar. The Taitapanuis issued proceedings against the insurer, the Moorabool Council and Mr Mellis, the certifier.

They said that the Council (through Mr Mellis) should not have approved the stump footing system.

During the hearing, the parties inspected the site.  After the inspection, all parties agreed that the house was seriously defective.  The Council and the Certifier both decided not to call answering expert evidence.  However, they continued to dispute which party should pay for the rectification works, and how much should be paid.

The Tribunal found that the insurer and the local Council (through the certifier) were equally liable for the rectification costs including demolition and rebuilding.  The Council and the Certifier appealed to the Supreme Court.  The appeal was dismissed.  The recent decision relates to their further appeal to the Court of Appeal.

Were the Council and the Certifier liable

The Court of Appeal upheld the decision of the Tribunal and found that the Council and the private certifier were liable for the defective house.

The finding is based on the negligence of the private certifier and the delegation to him of the Council’s duty to certify that the plans were in compliance with the building code.

The plans as submitted to the Certifier were inadequate – while showing a stump type footing system, they failed to show the external wall material for the downstairs section of the home, although specifying a 250mm. wall thickness.  This should have put the Certifier on notice that masonry type construction was proposed.

The court’s decision does not create new law, but incrementally advances the principles set down in Bryan v Maloney and Woolcock Investmentswhere courts examined the rights of subsequent owners to claim damages against builders or engineers responsible for the construction or design of houses or office buildings.

The principles that apply

Bryan v Maloney was a 1995 case in which a builder was found liable to the third owner of a home, for failing to install proper foundations in the home. This was the first occasion on which a builder had been found to owe a duty of care to subsequent owners of a home.  After Bryan & Maloney, State governments enacted legislation limiting the time period for making such claims to 10 years following completion of the home.

Woolcock Investments was a 2003 case in which the High Court found that a subsequent owner of commercial property was not owed a duty of care by the engineers who designed the footings for the building, principally because the original owner had expressly limited the extent of the engineer’s site investigations.

In Moorabool the Court noted that the Council, through Mr Mellis, was under a statutory obligation to inspect the application to build the home and to decide whether or not to issue the building permit.  Mr Mellis was not at liberty to limit his duty of care.  Under the Act, Mr Mellis also inspected the home and issued the certificate of occupancy.  The issue of the permit and the certificate of occupancy gave rise to statutory obligations that extended beyond the original owners of the home.  Structural deficiencies may well be concealed once the building work has advanced beyond its early stages, making subsequent owners more vulnerable to concealed defects. The Court noted that particulars of any building permit must be provided to any prospective purchaser for the first seven years of the life of the building, giving rise to the implication that the permit is intended to give reassurance to purchasers of the adequacy of the design of the home.

Conclusion

Private certifiers and local councils are under a duty of care to subsequent owners when they inspect and certify the plans and specifications for proposed building work.

The certification of inadequate plans, or of a defective design, can lead to liability for the cost of any resulting damage.

Contributor: Tom Grace

Tom is a former engineer who ran his own construction company for 20 years before becoming a construction lawyer.  He has wide experience in the engineering and construction fields and specialises in the resolution of commercial disputes.

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