Home Building Act requires Variations to the Works to be in writing and signed by or on behalf of each party to the Contract – Supreme Court in recent case sets out requirements in this regard

20/03/2020

Following a Decision of a Senior Member of the New South Wales Civil and Administrative Tribunal (NCAT) in the case of Paraiso and CBS Build Pty Limited, we received instructions to act on behalf of the Owner, Ms Paraiso to consider the decision of the Senior Member at first instance. 

The Senior Member at first instance found in favour of CBS Build Pty Limited (the Builder) and against the Owner (Paraiso).  Following receipt of instructions we reviewed the file and provided advice to the Owner.  Ms Paraiso appealed the Decision of the Senior Member to the NCAT Appeal Panel.  The Appeal Panel did not allow the Appeal.  See the decision (Paraiso v CBS Build Pty Limited [2019] NSWCATAP 211).  Thereafter we sought leave to appeal to the Supreme Court of New South Wales. 

On 11 March 2020 His Honour Justice Fagan J allowed the appeal against NCAT Appeal Panel’s refusal to allow the Appeal against the Senior Member’s decision.

This case has significant consequences having regard to the decision as to the obligation of the parties to comply with Section 7E of the Home Building Act requiring relevant Conracts to be in writing and signed by or on behalf of the parties to the Contract; and to comply with the terms of the Contract. 

In this case the Contract between the parties was generally in the form of the Master Builder’s Association BC4 Contract (July 2009) which is a standard form Contract commonly utilised for the construction of residential premises within New South Wales. 

The importance of Paraiso’s case is amongst other things, that His Honour decided that the Variations to the Scope of Works must be in writing signed by or on behalf of each party to the Contract. 

The issues dealt with amongst others, the requirements of Clause 14 in relation to Variations and further the effect of Section 7E of the Home Building Act. 

The consequence of the decision is that if the parties fail to comply with the obligations requiring the Variations to be in writing signed by the parties, the only remedy that would be available would be a possible quantum meruit remedy. 

In this article, we briefly deal with the critical elements relating to Variations and Provisional Sums Adjustment under a Contract.

The parties must comply with requirements of the Home Building Act in particular:
Section 7       Form of Contracts (other than small jobs).
Section 7E    Terms of Contract required.
Section 10     Enforceability of Contracts and other rights.

Section 7 of the Home Building Act requires that a Contract for building work relating to Residential Building Work (other than small jobs) must be in writing and be dated and signed by and on behalf of each party to the Contract amongst other formal requirements.

Critically Section 7E of the Act requires that Contracts to do Residential Building Work must include certain terms including:

(1)      Plans and specifications (all plans and specifications for work to be done under this Contract including any Variations to those plans and specifications are taken to form part of the Contract); and

(2)      Any agreement to vary the Contract or to vary the plans and specification for work to be done under this Contract must be in writing signed by or on behalf of each party to the Contract.

In this case Clause 14 of the Contract between the parties related to the claim for Variations and included 14(d)(i); as follows:

“If the Builder agrees to undertake a variation requested or required by the Owner the variation is to be detailed in writing and signed by the Owner (or the Owner’s agent) and the Builder.  Documents detailing the variation including any as appropriate amended drawings or specifications become the Contract documents”.

In Clause 14 there was also a regime in relation to ascertaining the cost adjustment for such Variations. 

As the Senior Tribunal Member’s decision at first instance did not adhere to those requirements and the Appeal against the original Senior Tribunal Member’s decision to NCAT Appeal Panel was dismissed, the Supreme Court allowed the Appeal on behalf of the Owner on this ground. 

Careful consideration of the facts of each individual case is required.  It will require extreme care in the consideration of the factual matters having regard to the applicable law and the presentation of the appropriate evidence.

If you find yourself in a dispute or have any concerns in relation to any building or construction matter, please contact Watson & Watson Solicitors.  Our highly experienced Solicitors can assist and provide advice in relation to all aspects of building and constructions matters or disputes.  Please contact Richard Watson Accredited Specialist Building & Construction or his Personal Assistant Shereen Da Gloria to discuss your matter and seek timely advice.

This is only a preliminary view and is not to be taken as legal advice without first contacting Watson & Watson Solicitors on 9221 6011.