Home > Kreisson Legal discusses the effects of the Dasco Decision

Kreisson Legal discusses the effects of the Dasco Decision

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The Kreisson Legal team delivers valuable legal advise  to its clients in the construction, retail, manufacturing and corporate markets.

Kreisson Legal recently discussed the implications for home owners of the decision of the Supreme Court in Owners Corporation SP 72357 v Dasco Constructions Pty Ltd and Ors [2010] NSWSC 819 delivered on 27 July 2010.

The Dasco decision, which addresses the question of who is ultimately responsible for building defects,  was handed down shortly after the recent decision of the Supreme Court in Ace Woollahra Pty Ltd (formerly known as Reed Construction Services Pty Ltd) v The Owners Strata Plan 61424 [2010] NSWCA 101 which resulted in the enactment of the Home Building Amendment (Warranties and Insurance) Act 2010 to introduce Section 18 D(1A).

In Dasco, the Owners Corporation commenced proceedings against the Builder for defective building work. In support of its claim, the Owners Corporation relied upon Section 18D of the Home Building Act 1989 to extend the operation of the statutory warranties prescribed by Section 18B of the Act.

In paragraph 12 of the Builders List Response, the Builder maintained that it was entitled to raise the proportionate liability provisions contained in Part 4 of the Civil Liability Act 2002 in order to limit it’s liability to the Owners Corporation.

The Owners Corporation applied to Court to have paragraph 12 of the Builder’s List Response struck out on the basis that the defence of proportionate liability provided by Part 4 of the Civil Liability Act 2002 was not available to a claim for a breach of implied warranties under Section 18B of the Home Building Act 1989.

The case raised the interesting question as to whether the proportionate liability provisions of the Civil Liability Act 2002 applied to claims for breach of the statutory warranties implied by the Home Building Act 1989.

His Honour Justice Einstein observed that there was no direct authority on point but found  at [23] that “…the ordinary and natural meaning of Section 34 (of the Civil Liability Act 2002) means that proportionate liability applies.”

The effects of the Dasco decision are very important because aside from identifying new risks for the Owner, it  places the spotlight on the already problematic Home Building Act 1989.
Although the Home Building Act 1989 is intended to protect the rights of Owner’s rights to recover loss for defective work; the Dasco decision has significantly eroded those rights and has transferred the risks associated with such recovery actions to the Owner.

The ultimate winners as a result of the Dasco decision are the Home Owners Warranty Insurers and Builders whose liability will ultimately be capped to the extent of the Builder’s liability.

The Owner will then be left to battle with the subcontractors who in all likelihood will not have Home Owners Warranty Insurance.

A restoration of the Owner’s rights consistent with the objects of the Home Building Act 1989 will require the intervention of Parliament.

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