Builder or Contract Manager? A recent Victorian Decision
Authors: Chris Camillin, Partner & Jeremy Quah, Associate
10 August 2012
MROCKI – V – MOUNTVIEW PRESTIGE HOMES PTY LTD  VSCA 74
The Court of Appeal in Victoria was recently asked to decide whether a building company was liable for defects in an expensive development in Brighton.
The building company successfully argued that it’s role was that of a contract manager rather than builder and as such it would only be liable if it failed to properly manage the contracts entered into by the owners with the firms that carried out the work.
The difficulty in ascertaining the defendant’s role arose because when the director went to buy an HIA form of contract for construction management he was told that this was not within the Defendant’s liability insurance. The sales clerk suggested he use a ‘cost plus’ contract form and the director accepted this advice but made some amendments and additions of his own devising.
It seems that he left in the form warranties that the building works would be carried out with reasonable care and skill and that the home would be suitable for occupation.
Nevertheless the works proceeded on the basis that the Defendant obtained quotations and the owners chose which contractors they would engage and paid them. After the works were completed certain significant defects became apparent.
The Plaintiff took action in VCAT against the defendant and a tiling company that had carried out relevant work. Judgement was entered against the tiling company but it appears that this was of no avail since the Plaintiff pursued the action against the Defendant.
Initially VCAT held that the written contract (amended by the director) was void for uncertainty and that the true nature of the agreement was contract management. As a result the Defendant was not liable. The judge at first instance disagreed but affirmed VCAT’s decision on the basis there was no breach of the contractual warranties. The scope of the Defendant’s work was contract management – not building.
The Court of Appeal agreed and also made some interesting comments on what use might be made of evidence regarding negotiations to construe a written agreement. Usually that would be impermissible but Buchanan JA indicated that it would be permissible if the evidence was that the parties had deliberately omitted some particular provision.
There is an obvious need for caution when advising on traditional ‘Land and Building‘ contracts or more significant developments. To avoid liability, developers should be careful when drafting contracts particularly when identifying the scope of works.
It is unclear why the implied covenants from the Domestic Building Contracts Act 1995 (VIC) did not override the contractual considerations but there seems to have been no discussion of this before the Court.
For advice on drafting land development or building agreements in Victoria and all relevant property arrangements please contact Chris Camillin or Jeremy Quah at our Melbourne Office for assistance.
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