Inspecting careless building work

Introduction

In 1995, the High Court upheld a claim in negligence by Mrs Maloney against Mr Bryan, the builder of her home, in relation to inadequate foundations.[1]

A remarkable aspect of the case was Mr Bryan had never met Mrs Maloney, who had purchased her home in 1986 from the Quittendens, who had in turn purchased the home from Mr Bryan’s sister in law, Mrs Manion. The home had been constructed 7 years before the claim was filed.

The Bryan v Maloney case caused some consternation within the construction industry as it opened the door for claims against builders for careless building work, without any limit on the time for making such claims.

Since the Bryan v Maloney decision, legislation has been introduced in South Australia limiting the period for claims for defective work to 10 years from completion, other than claims for personal injury caused by the defective work.

Claims for careless building work are particularly relevant when a home is purchased after the statutory warranty has expired, but before the 10 year limitation period ends and after the purchase is found to have defects.

Recent Court decisions have been less favourable to subsequent purchasers of commercial properties, or where builders have constructed projects limiting their liability under the terms of their contract with the original owner. 

However, Bryan v Maloney has remained of central significance in relation to the sale and purchase of homes where defects emerge after the purchase.

A recent Queensland Court of Appeal decision further clarifies how the law applies to residential construction.[2]

The Facts

In 2017, Ms Lewis purchased a Brisbane home at auction from Mr King. Mr King had purchased the home from a company owned by Mr Raymond, a builder who built the home in 2006.

The home is a multi-storey construction on a steep site, sloping down from the road.  The garage and entry level are adjacent to the road. 

The bedrooms are the next level down, with the swimming pool on the lowest level. There are non-habitable subfloor areas underneath the upper levels of the house.  There are hatches that provide access to the upper and lower subfloor areas.

Ms Lewis inspected the home on two occasions and observed one of the hatches. It was about half a metre across and 40 centimetres wide. She did not enter the area under the floor.

Prior to the auction, the real estate agent provided Ms Lewis with a building inspection report and a pest inspection report.  The reports described minor defects in the home.  The pest inspection report did not describe any visible termites or wood decay.   However, the pest inspection report was subject to many limitations, noting “some inaccessible areas” and “varying available crawl spaces”. 

Ms Lewis was not troubled by the minor defects and purchased the home at auction for $1.6 million.  

After settlement, Ms Lewis arranged for repairs to the minor defects and a pest treatment of the property.  However, the contractor she engaged refused to treat the property as he said there were major problems underneath the house in areas which could not be accessed.

Ms Lewis engaged a building inspector to report on these problems. The inspector entered the area under the house and was able to crawl on his stomach over most of the area to take photographs.  His photographs made it clear the home suffered from significant defects, including failures to comply with the Building Code of Australia (BCA).   Most of the lower subfloor area timbers were located too close to the surface of the ground with inadequate ventilation.  Termite activity was evident below the western boundary hatch.

Ms Lewis goes to Court

Ms Lewis made a claim in the District Court against Mr Raymond.  Ms Lewis said Mr Raymond owed her a duty of care to construct the home in a proper manner.  She said she was in a position of vulnerability to the builder, and the builder had breached his duty of care to her, causing her economic loss.

The following propositions are often stated as established by Bryan v Maloney:

  • A home is one of the most substantial investments made by an individual.
  • When building a home, a builder should know that an owner might suffer economic loss if the home is not properly built and owes a duty of care to the owner, and to any subsequent owner.
  • A subsequent owner is vulnerable to the builder, as the subsequent owner will be unaware of any hidden defects in the home and is unable to protect themselves in relation to those defects.
  • A subsequent owner relies on the builder of the home to properly build the home.
  • A builder who builds a home carelessly, for example failing to comply with the BCA, breaches its duty of care to any owners.
  • If the breach causes loss to the subsequent owner, the builder may be liable to compensate the owner for that loss.


The District Court applied Bryan v Maloney and found that Mr Raymond was liable to pay damages to Ms Lewis of $229,100 plus $67,466 interest.

Mr Raymond appeals

Mr Raymond appealed to the Queensland Court of Appeal. Amongst other things, Mr Raymond said Ms Lewis was not vulnerable to his failures to properly build the home and had not relied upon him, as she had claimed. 

Mr Raymond said the decision of the District Court failed to consider that Ms Lewis had the opportunity to obtain her own building inspection report, failed to properly inspect the home, and should have seen it had defects when she purchased the home at the auction. 

Ms Lewis said she relied upon the inspection reports provided by the real estate agent and these reports satisfied her that the home was properly built.

The Appeal Court noted Ms Lewis engaged someone to repair the minor defects shortly after settlement, and this person quickly observed the defects were more extensive than had been described in the agent’s reports.

The Court observed Ms Lewis could have engaged her own expert to conduct an inspection of the home prior to the auction.

One of the essential requirements of a finding of negligence is the person suffering the loss was vulnerable to the person who caused the loss. 

This aspect was critical to the Appeal Court’s consideration of the Mr Raymond’s appeal.  

The appeal Court quoted Chief Justice French in the Brookfield case:

“The subsequent owner would ordinarily be unskilled in building matters and inexperienced in the niceties of real property investment. Any builder should be aware that such a subsequent owner would be likely to assume that the building had been competently built and that the footings were adequate. Those considerations may be seen as elements of the notion of ‘vulnerability’, which has become an important consideration in determining the existence of a duty of care for pure economic loss. In this context, it refers to the plaintiff’s incapacity or limited capacity to take steps to protect itself from economic loss arising out of the defendant’s conduct.”[3]

The Appeal Court pointed out in Bryan v Maloney, the defects in the foundation could not be observed when Maloney purchased the home and only became apparent some months after the purchase when the house began to exhibit cracking.  The Appeal Court said Ms Lewis was in a different situation. 

The defects were quickly obvious to the inspectors who attended the house after her purchase at auction and for that reason, Ms Lewis had not established she was vulnerable to the breaches by Mr Raymond.  The appeal was successful.

Conclusion

Purchasers of homes should always obtain comprehensive inspections from competent, licenced inspectors before committing to the purchase.

In South Australia, building inspectors do not require any training or licence. The State Government is currently considering introducing licensing requirements for inspectors.

[1] Bryan v  Maloney  [1995] HCA 17.

[2] Raymond v Lewis [2024] QCA 43.

[3] Raymond v Lewis at [37].

 

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