Brookfield Multiplex Ltd v Owners Corporation Strata Plan 61288 (2014) 313 ALR 408
Tort law; Negligence; establishing a duty of care in relation to purely economic loss
Facts: Chelsea Apartments Pty Ltd (CA) a property developer, contracted with construction company Brookfield Multiplex Ltd (BML) for the building of a block of apartments on land owned by CA. When the building was completed, strata titles to the apartments were offered by CA to investors. The contracts for the strata titles contained provisions guaranteeing the building to be free of defects. In fact, after the strata titles were sold, defects became apparent. The corporation that represented the investors (OCSP) sued BML in Negligence, claiming that BML had owed the investors a duty of care and that, as a result of a breach of that duty, they had suffered an economic loss.
Issue: Did BML owe a duty of care to OCSP to avoid purely economic loss?
Decision: No duty of care was owed by BML to OCSP because in the overall circumstances they were not vulnerable to purely economic loss.
Reason: In tort law a duty of care to prevent foreseeable loss only arises when recognised circumstances exist. In particular, when a person suffers purely economic loss, a duty of care does not arise unless the person harmed was in a position of vulnerability in the sense of having a limited capacity to take steps to protect themselves from the particular risk of loss. In the present case, the investors were not obviously unskilled or inexperienced in the complexities of real estate investment and had included contractual warranties against building faults. They could not be regarded as necessarily reliant or dependant on the builder to protect them against the possibility of economic losses due to defects in the building.