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What Is a ‘Major Structural Defect’?

THE MEANING OF ‘MAJOR STRUCTURAL DEFECT’

The term ‘major structural defect’ appears to be clear. However, as with many apparently simple terms, case law reveals other stories. The interpretation of terms by the law can become complex and vary with the objective context and circumstances[1].

An important Victorian Supreme Court case considering ‘major structural defects’ is Clarke v Mariotis [2009] VSC 279 (15 July 2009). It concerned water seepage that could potentially lead to rusting. The rusting could in turn cause ‘deterioration and spalling [breaking into small pieces] in the base brickwork’.

The Supreme Court, constituted by Justice Hansen, held that ‘structural defect’ is not limited to ‘something that is or lies in a physical element of the subject building’ (at [41]). The term ‘structural defect’ covers anything relating to the structure of the building. For example, issues impacting ground conditions such as water flow or seepage affect a building’s structure because the building is ‘founded in the ground’ (at [41]).

His Honour’s decision suggested that ‘major structural defect’ included a defect that could produce consequences that relate to the structure of the building, not merely a defect in the building’s structure itself. Thus, the seepage, whilst not, strictly speaking, a defect in the structure, could lead to such a defect (at [41]). His Honour did not comment on how close the causal connection must be, or how high the probability, or whether the connection must be direct.

His Honour also found, in Clarke, [40] that it was irrelevant whether steps could be taken to cure the defect. The term ‘major structural defect’ often arises in a special condition in a contract of sale giving the purchaser a right to withdraw from the contract. Thus, a vendor wishing to preserve a contract of sale should define ‘major structural defect’ to exclude repairable defects.

Drafting contractual terms is, of course, a complex task and vendors should seek legal advice if they intend to do so.

Freeman Zhong

15 September 2017

[1] Toll (FCGT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165, [41].

Copyright © Kellehers Australia 2017

Liability limited by a scheme approved under Professional Standards Legislation. This fact sheet is intended only to provide a summary and general overview on matters of interest. It does not constitute legal advice. You should always seek legal and other professional advice which takes account of your individual circumstances.

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