Concurrent Wrongdoer Liable in Multi-Party Building Works Disputes at VCAT

Introduction

A recent decision in the ongoing VCAT matter of Owners Corporation PS623721 v Shangri- La Construction Pty Ltd [2022] VCAT 1499 may significantly impact how future claims and defences are pleaded in multi-party building disputes with respect to defective works.

Section 8 Warranties and Apportionment

All building contracts for domestic building works are governed by the Domestic Building Contracts Act 1995 (VIC) (Act). Section 8 of the Act provides various statutory warranties in relation to domestic building works as follows:

(a)   the works will be carried out in a proper and workman like manner and in accordance with the plans and specifications of a contract;

(b)   all materials supplied by the builder will be good and suitable for the purpose for which they are used;

(c)   the works comply will all laws and legal requirements;

(d)   the works will be carried out with reasonable care and skill;

(e)   where the erection or construction of a home occurs, will result in a home which is suitable for occupation at the time the work is completed; and

(f)    the works and any material used in carrying out the works will be reasonably fit for that purpose or will be of such a nature and quality that they might reasonably be expected to achieve that result.

Generally, an owner will commence legal proceedings against a builder for a breach of some or all of the statutory warranties with respect to defective works. 

A builder may seek to apportion its liability by joining other parties into the proceedings as concurrent wrongdoers potentially responsible for the defective works such as the subcontractors who performed the defective works.

Orders in Owners Corporation PS623721 v Shangri- La Construction Pty Ltd

In his Orders dated 30 December 2022, Member C Edquist held that the statutory warranties in section 8(a) and 8(d) of the Act and are not absolute and are therefore apportionable between concurrent wrongdoers such as the builder and any subcontractors who performed the defective works.  

Accordingly, a builder may validly raise an apportionment defense in relation to any alleged breach of section 8(a) and 8(d) of the Act, resulting in an owner being entitled to recover damages from a concurrent wrongdoer such as the subcontractor who performed the defective works.

Conversely, Member C Edquist held that a builder cannot raise an apportionment defence for any alleged breach of sections 8(b), 8(c), 8(e) or 8(f) of the Act.

Conclusion

Member C Edquist has followed the approach taken in the VCAT decision of Lacrosse by using the term “absolute” to describe certain section 8 statutory warranties under the Act. However, it remains to be seen whether a higher court upholds this interpretation of proportionate liability under Victorian law. 

To learn more about apportionment in multi-party building works disputes or if you require legal assistance, please contact Chris Moshidis, Director and Principal Lawyer on +61 9521 7956 or at chris@urbanlawyers.com.au.