Raymond v Lewis

This case concerned a claim against a builder by a subsequent purchase of a home. The purchaser relied on a report produced by the vendor indicating that there were only minor defects in the property, though the inspection did not consider the whole of the property. After settlement, the purchaser discovered various major defects. The Court found that no duty of care was owed by the builder to the purchaser. While Bryan v Maloney remains authoritative, it must be read in light of subsequent High Court decisions that limit the circumstances in which a builder will owe a duty to a subsequent purchaser to cases in which the purchaser can show they were vulnerable to the builder.

Mullins P, Morrison JA and North J

26 March 2024

The plaintiff, Ms Lewis, purchased a dwelling house in Paddington for $1.6 million. [2]. The property was built by the defendant, Mr Raymond. [2]. The property was built for Tycoon Developments, it was subsequently sold to Mr King, and Mr King sold the property to Ms Lewis. [2]. For the purposes of the sale, Mr King commissioned building and pest inspection reports. [10]. The reports indicated some minor defects, being defects which are “generally of an ongoing maintenance nature”. [12]. No visible signs of termites were found, though that did not mean that there were no termites. [13]. In addition, the report indicated that some areas of the property were inaccessible. [13]. No major defects were noted in the reports. [12]. Ms Lewis did not obtain her own building and pest inspections. She gave evidence that she did not think she needed to do so as the vendor’s reports indicated that there were no problems. [14].

Within a few months of the purchase, Ms Lewis had discovered significant defects including defects related to termite entry and timber rot. [4]. Ms Lewis brought a claim in negligence against Mr Raymond for damages associated with these defects. The key issue in the appeal was whether Mr Raymond owed Ms Lewis a duty of care.

In Bryan v Maloney (1995) 182 CLR 609, the High Court found that a professional builder who constructs a house for the then owner of the land owes a prima facie duty to a subsequent purchaser. [30]–[31]. The Court considered that Bryan v Maloney remains authoritative, however, it must be considered in light of Woolcock Street Investments Pty Ltd v CDG Pty Ltd (2004) 216 CLR 515 and Brookfield Multiplex Ltd v Owners Corporation Strata Plan 61288 (2014) 254 CLR 185 where the High Court “somewhat clarified the circumstances in which a duty of care by a builder who constructs a building is owed to a subsequent purchaser of the building who suffers pure economic loss arising from defects in the construction”. [42]. The preponderance of views expressed in those cases confine Bryan v Maloney so that the duty will not be owed by the builder unless there is relevant vulnerability on the part of the purchaser at the time of the purchase. [42]. Vulnerability will exist when the purchaser is incapable of protecting themselves from pure economic loss sustained as a result of defects. [42]. The nature and discoverability of the defects in the construction at the time of purchase are relevant to whether the purchaser is vulnerable in the requisite sense. [42].

The Court was not satisfied that the evidence established vulnerability on the part of Ms Lewis. Although the defects did not appear in the vendor’s building and pest reports, the defects were discovered soon after the purchase. [50]. The defects would therefore have been discoverable prior to the purchase, had Ms Lewis obtained her own building and pest reports. [48], [52]. The inference was open that Ms Lewis was “capable of procuring others to do any inspections of the property that were prudent for the expenditure she proposed to undertake”. [48].

In addition, the Court was not satisfied that Ms Lewis relied on the builder. [57]. In Bryan v Maloney, “the reliance that was found in Bryan v Maloney was to some extent based on the facts that inadequate footings did not become manifest until after the purchase when cracks began to appear in the walls”. [57]. Here, as noted above, the defects were discoverable. [57]. In addition, Ms Lewis’ evidence indicated that she was content to rely on the vendor’s reports despite the qualifications in those reports. [57].

As such, Ms Lewis was not vulnerable to the builder in the requisite sense, and no duty of care was ownd. [58].

L Inglis