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Settlement and Costs in Building Defect Claims

Posted 01 March 2011

Category: Building Defects

Managing costs is an important aspect of building defect claims. The Supreme Court recently considered this.

New tool to help owners recover costs in defects claims

In Owners Strata Plan 62327 v Vero [2009] NSWSC 908 the owners commenced proceedings to dispute an unsatisfactory response from their insurer to a claim for defects.  The defects claim was settled—with the insurer accepting liability for a total of $2.7 million—however the insurer would not agree to pay the owner’s costs of running the proceedings.

The Court awarded the owners a substantial 80% of their costs, finding in summary that the owners were entitled to recovery as they had acted reasonably and were pursuing a genuine claim.

This precedent should serve as an extra tool to help owners corporations achieve successful settlements of defects claims and recover their costs without the need for further litigation.

Settlement and costs

One of the key elements of most out-of-court settlements is the withdrawal of the proceedings by the Plaintiff. Ordinarily the issue of costs will be dealt with in the settlement agreement.

If agreement cannot be reached on costs, procedural rules place the onus on the Plaintiff to show that they are entitled to their costs—a fact which some Defendants seek to take advantage of to force the Plaintiff to argue the issue in court.

Key Points

  1. Owners corporations may be able to sue for defects despite complex development schemes that threaten to rob them of that right.
  2. Owners corporations who settle their defects litigation may be able to recover substantial costs in court if the other parties refuse to pay.
  3. This area of law is complex and important new cases are regularly decided. Owners corporations should always seek legal advice regarding their defects claims.


***The information contained in this article is general information only and not legal advice. The currency, accuracy and completeness of this article (and its contents) should be checked by obtaining independent legal advice before you take any action or otherwise rely upon its contents in any way.

Bannermans Lawyers

Published 01 March 2011

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