The Owners - Strata Plan No 61288 v Brookfield Australia Investments Ltd

The Owners - Strata Plan No 61288 (the appellant) appealed to the Court of Appeal of New South Wales against a decision of the Equity Division. The dispute concerned a claim by the appellant, an owners corporation for a commercial building, against the first respondent, Brookfield Australia Investments Ltd, the builder of the premises, for pure economic loss arising from alleged latent defects in the common property.

The primary legal issue before the Court of Appeal was whether the builder owed a duty of care to the owners corporation in relation to latent defects in the common property of a commercial building. This involved considering the scope of a builder's duty of care at common law, particularly in circumstances involving commercial premises and claims for pure economic loss, and whether the owners corporation was vulnerable to such loss. The court also considered the significance of statutory warranties, which are typically associated with residential building work, in the context of commercial premises.

The Court of Appeal reasoned that the established principles of negligence, particularly concerning the duty to avoid causing foreseeable economic loss, applied to the relationship between a builder and a subsequent owners corporation. The court found that the owners corporation was vulnerable to loss arising from latent defects in the common property, as it was responsible for the maintenance and repair of that property and had no other means of recourse against the builder for such defects. The court distinguished the present case from situations where statutory warranties might be the exclusive remedy, noting that such warranties were not applicable to this commercial development. The court concluded that a duty of care did exist, encompassing defects that were structural, posed a danger, or rendered the apartments uninhabitable.

The Court of Appeal allowed the appeal, setting aside the previous orders. It answered a separate question by declaring that the first respondent owed the appellant a duty to exercise reasonable care in the construction of the building to avoid causing the appellant to suffer loss resulting from latent defects in the common property that were structural, constituted a danger, or made the serviced apartments uninhabitable. The first respondent was ordered to pay the appellant's costs in the Court of Appeal, with directions for the determination of trial costs.