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DEFECT LIABILITY Manyofyou will recall the decision
PROVISIONS of Justice Young in the matter of
Sterling Estates Development
Colin Biggers & Paisley Corporation Pty Limited v Malouf
This involved a sale 'offthe plan' of
a home unit at Camperdown. The
vendorsought completion but the
purchaser refused to complete as
there was an alleged 'special fault'
in that the floor in the lounge room
area was uneven.
The vendor did not accept that the
unevenness of the lounge room
floor constituted a special fault,
issued a notice to complete and,
when the purchaser did not settle at
the end of the time frame set out in
the notice, purported to terminate
the contract.
At first instance, Justice Young
concluded that the unevenness of
the floor fell within the definition of
'special fault' in the contract as it
required urgent attention and
constituted a special danger:
However, on appeal, the three
judges of the Court of Appeal
unanimously overturned this
finding.
The court held the following to be
relevant:
(a) to rectify the defect wou ld
require moving furniture, uplifting
the carpet and levelling the
unevenness. This would only take a
few days and would not be unduly
inconvenient to the occupier of the
unit;
(b) council had issued an occupation
certificate in respect of the unit; and
(c) the vendor had obtained
independent advice that the unit
development had been completed
to a satisfactory standard and that
each of the units did not contain
defects which were deemed to be
significant and requiring immediate
attention.
Looking at these facts, and
acknowledging that there was an
implied term that the purchaser
would not have to settle until the
AUSTRALIAN CONSTRUCTION LAW NEWSLETTER #95 MARCH/APRIL 2004 27
propertywas in the condition
contemplated by the parties at the
time of entering the contract,
namely ready for occupation, the
court held that the defect was not a
significant defect or 'special fault' as
defined and that the defect was not
required to be rectified prior to
completion. The defect was not held
by the court to be one which would
preclude the pu rchaser from
substantially occupying the unit if it
was not repaired priorto
completion. Even though there
would be inconvenience in rectifying
the defect after completion, the
undertaking of this work would not
substantially interfere with the
occupation of the unit by the
purchaser or his tenant.
Developers should give
consideration, when contemplating
whether or not a resale contract
contains a defect liability provision,
as to what defects the pu rchaser
can insist be attended to before
settlement and thosewhich should
await rectification during the
normal 90 or 180 days defect
rectification period. Perhaps
developers cou ld give consideration
to the provision merely stipulating
that only significant defects need to
be rectified before completion, with
significant defects being defined as
any defects identified by council as
requiring attention forthe purpose
of issuing an occupation certificate.
This would then fit in neatly with the
recent amendment to the
Conveyancing Actwhich only
requires a purchaserto settle, in
respect to an off-the-plan
purchase, 14 days after a copy of an
occupation certificate has been
given to the purchaser:
This article was previously
published in Colin Biggers &
Paisley's Property Update
[December/January-2003/2004).
Reprinted with permission.