The Owners - Strata Plan 80647 v WFI Insurance Limited t/as Lumley Insurance

The Owners - Strata Plan 80647 sought compensation from WFI Insurance Limited t/as Lumley Insurance for losses resulting from a builder's breach of statutory warranties under the Home Building Act 1989 (NSW). The builder had become bankrupt, and the owners corporation, as the successor in title to the developer, pursued damages for the loss suffered due to the breach. The central issue was whether the claim constituted a provable debt in the builder's bankruptcy, and if so, whether it was released upon the builder's discharge from bankruptcy. The owners corporation also sought to determine if the claim was a demand arising "otherwise than by reason of a contract or promise" under section 82(2) of the Bankruptcy Act 1966 (Cth).

The court examined whether the statutory warranties created a direct debt or liability that was provable in the builder's bankruptcy. It was also necessary to assess if the claim was released upon the builder's discharge from bankruptcy under sections 18B and 18D of the Home Building Act 1989 (NSW). Additionally, the court considered whether the claim was an indemnity for loss or damage arising from a breach of statutory warranties, which would be a debt or liability released upon the builder's discharge from bankruptcy. The timing of the claim, made after the builder's discharge from bankruptcy, was also scrutinized to determine if the claimant could recover compensation from the builder due to the insolvency.

The court concluded that the claim constituted a provable debt in the builder's bankruptcy. It held that the statutory warranties created a direct debt or liability that was not released upon the builder's discharge from bankruptcy. Furthermore, the court determined that the claim was a demand arising "otherwise than by reason of a contract or promise" under section 82(2) of the Bankruptcy Act 1966 (Cth). Consequently, the claim was not released upon the builder's discharge from bankruptcy. The court found that the owners corporation could recover compensation from the builder's insurer because the claim was made after the builder's discharge from bankruptcy. The court's decision provided clarity on the nature of claims arising from breaches of statutory warranties in the context of builder bankruptcies.