Duty of Care and the 'Salient Features' Test

The NSW Court of Appeal decision in Makawe Pty Limited v Randwick City Council [2009] NSWCA 412 confirms that in cases of a novel relationship, the duty of care is to be determined according to a 'salient features' test. The decision also deals with the question of what constitutes pure economic loss and raises the possibility of a new interpretation of section 44 of the Civil Liability Act 2002 (NSW).

Key points:

A duty of care is unlikely to be imposed where there is no connection between the parties. In such cases, a 'salient features' test is to be employed. Structural defects in construction causing economic loss with nothing more is mere economic loss. Facts

In 1995, Randwick City Council (Council) approved a development application to construct a three-storey residential apartment building comprised of 18 studio apartments and a basement car park which would sit three metres below ground level. The following year, the developer applied for and was granted a building application by the Council. At the time of this second approval, the Council was in possession of a report by geotechnical experts revealing that the car park was situated at almost the same level as the local water table and would be at risk of flooding as the table rose and fell.

Construction was completed at the end of 1996, with no imposition by the Council of any condition of consent relating to the level of the car park. Subsequently in 1997, the building was sold to Makawe Pty Limited...