Balkin and Davis pp. 439-445

A Summary of the B+D Reading for Week 7.

Defective Property

This is concerned with harm which has been caused to the P's property by the impact thereon of the effect of the D's negligent act or omission, rending the property of less worth than it had previously. Rather strangely, the courts have dealt differently with chattels as opposed to the treatment of buildings. Hence they are discussed separately below.


In both Aus and NZ, if a chattel purchased by the P is found to have been defectively manufactured, and thereby causes financial harm, compensation for that loss or damage may be claimed directly against the manufacturer or importer, under either Div 2A of Pt V of the Trade Practices Act 1974 (Cth) or PT III of the Consumer Guarantees Act 1993 (NZ).

The P need only show that the goods are not of an acceptable quality and the manufacturer may be liable, despite having taken all reasonable care. But if these statutory provisions are not applicable, it is unlikely that a manufacturer of chattels would owe a duty of care to a consumer with respect to purely financial harm suffered as a result of a defective manufacture.


If it is a building which is discovered to have been constructed defectively, the person who owns the structure at the time the defect comes to light may, in many circumstances recover the diminution in value caused by the discovery of that defect from at least some of the parties involved in the original construction.
This is only in NZ and Aus only, not the UK.

Liability for a defective building is based on a variety of factors

  • Reliance by the P on the D's skill
  • Acceptance by the D that such reliance will be reposed in his or her skill
  • Vulnerability of the P to the harm

To ascertain who may be liable, it is sufficient to consider those on whom the current owner may have relied, and whether they had assumed that responsibility.

Builder, engineer and architect

A professional builder owes a DOC in relation to latent structural defects to whoever should happen to own the house at the time the defects are discovered. It is also clear that an engineer, architect or other professional person engaged by the builder in the construction process with owe a DOC to the person who owns the building when any defect comes to light.

The only matter about which some doubt persists is whether the DOC by a builder, engineer or architect is affected by any terms of limitation or exclusion in the contract which any of them had with the original owner.
Although the issue has not been the subject of a decision yet, it appears that while such a contract could not affect the existence of a DOC to the subsequent purchaser, it would be relevant in determining what standard was to be expected of the builder, engineer or architect.

Local Authority

There is considerable doubt (in Aus) whether a local authority owes a DOC to the subsequent purchaser of a domestic dwelling to take care in carrying out inspections of the structure while it is in the process of construction. If there is no assumption of responsibility by the local body, one of the essential elements of a DOC to the subsequent owners of a building is missing.


While a subsequent owner may well be able to demonstrate the necessary reliance and assumption of responsibility, it is improbable that the original owner would be able to prove those twin elements of a DOC.