The NSW Court of Appeal decision in Cyril Smith & Associates
Pty Limited v The Owners-Strata Plan No 64970  NSWCA 181
serves as a reminder that building owners should investigate
building defects as early as possible.
The case concerned an eight storey residential building which
was completed in early 2001. By the end of that year, it had become
apparent that there were problems with the building including water
ingress through windows which caused damage to the units and the
steel structure supporting the roof.
The Owners Corporation commenced proceedings in 2005 claiming
damages from the builder. In February 2008, the Owners Corporation
joined the architect to the proceeding alleging negligence.
Supreme Court finding
The Owners Corporation obtained judgement against the builder
and architect respectively. The builder also obtained judgement for
contribution against the architect.
Issues on appeal
The architects appealed the decision on the basis that the cause
of action accrued in 2001, when water ingress was identified by the
Owners Corporation, and accordingly the six-year limitation period
for bringing a claim had expired by 8 February 2008. It relied on s
14(1) of the Limitation Act 1969 (NSW), which stipulates that
proceedings founded on contract or tort must be commenced within
six years "running from the date on which the cause of action
Accordingly, the issue before the Court of Appeal was when the
cause of action first accrued to the Owners Corporation.
Court of Appeal – findings
The Court found that where there has been negligent construction
of a building, the relevant loss accrues "when the defects
becomes manifest or are otherwise discovered". Importantly,
the Court held that it is the physical defect that must be known or
manifest, not that the cause of the defect must be identifiable.
The defect was therefore "the windows" (because they were
not adequately weather proof) and not the design or installation of
the windows or the physical consequences of the water ingress.
The Court held that the Owners Corporation was aware of water
penetration through the windows (being the "defect") in
2001 and, as it had failed to bring its claim against the architect
within six years of accrual of the cause of action, its claim
against the architect was time-barred.
What do you need to know?
Building owners should investigate all signs of leaking or
damage and take steps to enforce any rights at law against the
parties responsible for defective works as soon as possible. It is
particularly important that building owners investigate issues that
may be symptomatic of an underlying latent defect, such as a
structural problem, which may be expensive to remedy.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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