ASSIGNMENT PROBLEM

Jojo Babbit was a builder. He was engaged by Sahara Joffy to build a combined retail and residential strata complex on land which SJ owned at Fairfield in Sydney. The complex was called 'Sahara Dreaming'. The complex was to consist of a combination of retail shops, privately owned residential units as well as serviced apartments to be operated by a purchaser of those particular lots. The lots earmarked for sale as serviced apartments were allocated on the strata plan as lots 1-10. Lots 11-50 consisted of the private residences and lots 51-70 comprised the lots allocated to retail shops. The development was built under a design and construction contract made in November 2017 between JB (as builder) and SJ (as the original owner and developer of the land).

When JB decided to undertake the project with SJ he only had limited experience in building and construction. JB had only ever undertaken development of free-standing, small residential dwellings. These projects were limited in their scope and value, with no project involving anything other than basic home building contracts. No home that he had developed ever exceeded a contract price of AU $1 million. In contrast, Sahara Dreaming was a multi-milliondollar development with both residential and retail spaces and a total contract price of overAU $78 million.

The buildings for Sahara Dreaming were all completed by JB in September 2018. The entire complex was then purchased from SJ by Daimaru Pty Ltd for a total of AU $112million in December 2018. The following month, the strata corporation for Sahara Dreaming was registered under the relevant NSW strata schemes registration legislation.

In April 2019, Vega, the Managing Agent of Sahara Dreaming, noticed a number of problems with many of the lots in the complex. Many had suffered severe damage from water penetration issues and there were other major structural defects in approximately 82% of the lots in the complex. The estimated bill to repair the multitude of problems caused by the defective works undertaken by JB is approximately AU $30 million. Daimaru do not know what to do. Without the repairs being undertaken, the lots will not be able to be sold by them. They estimate that they have lost approximately AU $150 million in sales as a result.

Daimaru initially approached SJ to see if it could obtain compensation from her for the defects. Unfortunately, they discovered that SJ had been made a bankrupt by the Federal Court of

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Australia not long after the sale of Sahara Dreaming to them. The most they have been able to ascertain from SJ, apart from the fact of her bankruptcy, is that JB is a very wealthy builder with many assets in his name.

Daimaru have now come to your boss seeking advice on whether it can maintain a cause of action in the tort of negligence against JB for the latent defects in Sahara Dreaming. It has already received advice on whether it can maintain any action under potentially applicable legislation. Accordingly, your manager has asked you to deal only with whether there may be a basis to sue JB using the tort of negligence. Specifically, she has asked you to advise her as to the following matters:

(1) whether JB would owe Daimaru a duty of care in the circumstances;

(2) what further facts, if any, you would need to know in order to provide a final opinion on whether JB would owe Daimaru a duty of care in the circumstances;

(3) a brief description of the remaining elements of the cause of action in the tort of negligence that Damiaru would have to establish to be successful in any claim against JB.