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Council as a Developer, why not!

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In 2015, a claim was brought by the owners corporation against a local Council for defects arising out of a failure to construct the building in accordance with the statutory warranties implied under the Home Building Act 1989. Council was the original owner of the land upon which the building was constructed and remained the owner until the registration of a strata plan of subdivision. The builder was in liquidation.

Council first denied that it was a developer for the purposes of the Home Building Act. Upon Council’s application, this issue was brought before the NSW Civil & Administrative Tribunal for a preliminary determination. In doing so, Council sought to claim the protections under the Local Government Act in an attempt to have the owners’ claim struck out. The owners successfully defeated Council’s preliminary defence and the Tribunal confirmed that Council was a developer for the purposes of the Home Building Act.

Council then sought to deny the existence of the defects. One of the key defects related to the degree of movement in the floorboards of each lot. The owners produced evidence through a survey to prove the excessiveness of the movement of the floorboards. Not having a clear building code or standard by which such movement could be measured, the argument centred on the ambiguity of the relevant codes/standards and the excessive movement caused by the underlying unevenness of the concrete floor slab.  

Ultimately, the Tribunal acknowledged the difficulty of proving a fact that cannot be easily proven, as is the case of excessive movement and unevenness of the concrete slab hidden by the floorboards. However, the Tribunal took a practical approach and was persuaded by the owners’ experts in their description of the undulations they felt when walking across the floors of each unit.

Council also sought to argue that the excessive movement was not present in all of the 6 units. All of these arguments were supported by the builder’s home warranty insurer, the NSW Self Insurance Corporation, against whom a claim was brought by the owners for indemnity under the home warranty insurance policy.

The First Decision

The Tribunal found in favour of the owners corporation on the flooring issue (amongst other defects) that the excessive movement of the floorboards was a defect. The Tribunal interpreted the standard broadly and applied the expert evidence practically in reaching that conclusion.

The Appeal

Council subsequently lodged an appeal against the Tribunal’s decision insofar as it dealt with the excessive movement of the floorboards. No appeal was brought against the remainder of the defects for which judgement was issued. Again, Council was supported in its appeal by SICorp.

Similar arguments were made by each party to the Appeal Panel as that which were raised before the Tribunal.

The Appeal Panel had to determine whether there was an error in the original decision and whether that error warranted that the appeal be granted or not.  The Appeal Panel found that there was no error and dismissed the appeal (with costs).

It found that the practical reasoning and decision by the Tribunal in the original decision was correct. The Tribunal was persuaded by the owners’ expert evidence that there was excessive movement of the floorboards and that this was occurring in all lots.  As a result there was a defect and that defect was covered by the statutory warranties implied by the Home Building Act.

Consequences from the decision

The decision highlights that not only are Councils captured by the Home Building Act as developers (when relevant) but that in making decisions where the relevant standard is not clear the Tribunal will take a practical approach in considering a potential defect.  It also highlights that expert evidence is paramount to that decision being made and the relevant standard being interpreted.

In conclusion, as this was a 6 lot scheme the resilience of the owners was tested during all facets of the case but it does show that with resilience, commitment and a strong team (of experts and our Building and Construction team) a tough case can be run and won (and making a new bit of law in the process).