Assignment of warranties under construction contract – did it apply to accrued causes of action?
Tzaneros Investments Pty Ltd v Walker Group Constructions Pty Ltd  NSWSC 50
A single judge of the Supreme Court of New South Wales has found that an assignment of contractual warranties in a contract to construct a container terminal was effective to assign causes of action that had accrued at the time of the assignment
The plaintiff was the assignee of warranties given by the defendant (WGC) to the principal under a contract to construct a container terminal at Molineux Point, Port Botany, New South Wales.
Defects in the paving were discovered and the plaintiff claimed the cost of replacing the pavement in the sum of $14.8m.
WGC defended the claim on the following grounds:
- the assignment was not effective to assign any cause of action that had already accrued at the time of the assignment;
- the plaintiff had not suffered any loss as it was fully aware of the breaches at the time of the assignment (relying on Allianz Australia Insurance Ltd v Waterbrook at Yowie Bay Pty Ltd  NSWCA 224 at ); and
- the rectification of the works in the manner contended for by the plaintiff would result in a betterment.
The judge found in favour of the plaintiff. His Honour found that the language of the assignment, viz. “all of the benefit of the Building Warranties”, included the right to sue in respect of breaches that had already occurred. The judge also rejected the “no loss” defence. In Allianz, the issue was whether a subsequent purchaser of the property had suffered damage in its own right as a result of breaches of warranty by the builder. In the present case, the plaintiff was not suing in respect of obligations owed to it in its own right, but in respect of rights assigned to it as part of the sale of the Terminal. In the absence of evidence to the contrary, it is to be inferred that the price paid reflected the fact that the warranties were being assigned at the same time. The judge considered the position of betterment  –  and concluded that it was not appropriate to make a discount for betterment.
Purchasers of homes in Victoria might be well advised to obtain an assignment of the statutory warranties granted to home owners under section 8 of the Domestic Building Contracts Act 1998 [DBC Act]. Under s. 9 of the DBC Act, purchasers are entitled to take proceedings against the builder of the home for breaches of warranties given to the original contracting party as if they were a party to the original building contract [s. 9 DBC Act]. In VCAT, however, purchasers of homes have been prevented from recovering the cost of rectifying defective work if they were aware, or ought to be been aware, of the defect at the time of purchasing the house.