In a County Court decision handed down on 10 September 2008, the
judge determined that the Domestic Building Contracts Act 1995
(Vic) (Act) and the protections it affords will not apply to
building contracts between builders and owners who are
The case involved a building contract between the plaintiff
builder and two defendant companies for the construction of a large
number of residential units (which subsequently were to become a
hotel and serviced apartment complex). The builder applied to the
Court for summary relief by reference to a contractual payment
certificate and also via the security of payment legislation. The
defendants sought to stay the builder's application on the
basis that the Act applied to the building contract and that VCAT
was the appropriate forum.
The judge reviewed various authorities and:
noted that the defendant companies were conceded to be
determined that the Act was not intended to apply to
"major commercial transactions" such as that before him
in the present case.
The judge refused the defendants' stay application.
In reaching his decision the judge referred to many well known
cases, including Winslow Constructions Pty Ltd v Mt Holden Estates
Pty Ltd where Hansen AJA of the Court of Appeal stated "the
intent of the DBC Act is to protect individual home owners rather
than commercial developers", and also Kane Constructions Pty
Ltd v Cole Sopov & Ors where Warren CJ stated ..."it seems
to me that the Act was not intended to apply to
The judge distinguished the findings in Mirvac (Docklands) Pty
Ltd v Philip and Shaw v Yarranova Pty Ltd, on the basis that the
disputes in question in those cases concerned vendor contracts
between the developer and owner.
The judgment in Glenrich, if correct, raises a number of issues
for owners, builders and developers to consider when contracting
for the construction of, or purchase of, a home, including whether
an owner who is having a home (including apartment) constructed
pursuant to a building contract is a "developer"
the building contract in question is a domestic building
contract for the purposes of the Act and subject to the
restrictions and requirements of the Act including:
cost escalation clause restrictions and
implied warranties in favour of the owner
purchasers need to enquire as to the status of the original
owner, to determine whether or not the Act applies and therefore
whether the purchaser has (subject to limitation issues) the
benefit of implied warranties that run with the land pursuant to
sections 8 and 9 of the Act.
The judgment contemplates a scenario where subsequent owners
will have different rights depending on whether their home was
constructed by a builder under a building contract with a
"developer" or "non-developer" owner.
We understand that this aspect of the judgement has been
appealed. It remains to be seen whether or not the appeal is
successful. In the meantime, parties to building contracts
involving domestic building work need to give careful consideration
to the above issues before finalising their contractual
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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