Barton v Stiff [2006] VSC 307

What the court decided

By a building contract dated 5 January 2000 the builders agreed to construct a new house on the owners' land in Wodonga [1]. Some of the bricks below the damp proof course failed because they were affected by salty groundwater at the land [1]. Clause 11 of the contract contained express terms identical to the statutory warranties in section 8 of the Domestic Building Contracts Act 1995 (Vic) [6]. In the Tribunal the owners alleged approximately 60 items of defective work, and they succeeded on a claim that the bricks were not suitable for their purpose [11]. The Tribunal ordered the builders to pay compensation for breach of the contract, and they appealed by leave [2]. The issue on appeal was who should bear the cost of rectifying the affected brickwork [3].

The tribunal member found that the bricks were general purpose bricks unsuitable where there is salty groundwater [12]. He accepted the evidence of a local building surveyor and a local builder that they had never encountered salty groundwater near the land, and found its presence "highly unusual" [12]. The tribunal member nevertheless held the builders liable on an absolute warranty of fitness for purpose, emphasising that they had a design as well as a build obligation [17], [18], [19].

Uncontradicted evidence, not the subject of any finding, included a soil report dated 22 July 1992 [13]. From one bore hole it recorded that no groundwater was encountered at the time of the investigation [13].

Hargrave J accepted that the tribunal member had not found that the bricks were not good quality general purpose bricks [21], [22]. That left the obligation to supply materials, and a completed house, fit for the intended purpose [23]. The builders accepted that their warranty of fitness for purpose, whether express or implied, was absolute [33]. They argued that the intended purpose of the house had to be identified by reference to the actual and likely groundwater conditions at the land [33]. Asked for authority supporting that argument, the builders' counsel said that there was none [34]. His Honour's own research revealed Independent Broadcasting Authority v EMI Electronics Ltd and BICC Construction Ltd [34], [35]. There Roskill LJ, for the English Court of Appeal, concluded that the obligation was to provide a mast proof against any meteorological conditions likely to be encountered in that area [36].

His Honour held that this reasoning should be applied, as it identifies the relevant purpose rather than denying that the warranty is absolute [37]. He said that contracting parties should not be taken to have intended cataclysmic events to be covered by such a warranty, at least where they are not likely to be expected in the area [38]. That applied equally to the clause 11.2 warranty to provide materials "suitable for the purpose", unqualified by a standard of reasonable fitness [38]. Otherwise the builders would in effect be insurers of the house, which the parties could not have intended [39]. The warranties in this case required materials, and a completed house, proof against any groundwater conditions likely to be encountered at the land [39]. As salty groundwater there was highly unusual, the failure of the bricks was not a breach [39]. The tribunal member erred in law by failing to consider the purpose by reference to the likely groundwater conditions he had found [40].

The owners' challenge to the finding that the salty groundwater was highly unusual failed, as it was open on the evidence [41]. Section 148(1) of the Victorian Civil and Administrative Tribunal Act 1998 (Vic) permits an appeal on a question of law only, and only with leave [41]. His Honour said that the appeal would be allowed and that he would hear the parties as to costs and the form of the judgment [43].

Why it matters

A single judge, applying English authority found by his own research, treated an absolute warranty of fitness for purpose in a domestic building contract as measured against a purpose that takes account of the conditions likely to be met at the site [34], [37], [39]. Where defects are caused by unusual site conditions, expect their likelihood to be contested. Here the outcome turned on a finding of fact which, being open on the evidence, could not be disturbed on an appeal limited to questions of law.

Numbers in square brackets are paragraph numbers of the judgment. This note summarises a decided case for education and is not legal advice. See how the notes are written.