Builder’s Defence to Owner’s Claim that the Builder Breached the Statutory Warranties – Section 18F of the Home Building Act rarely used and rarely successful

05/04/2021

The Home Building Act 1989 (“Home Building Act”) (HBA) sets out in Section 18B warranties (Statutory Warranties) as to residential building work which are implied in every Contract pertaining to residential building work. 

Section 18G of the HBA provides that the parties cannot contract out of the obligations of the Builder imposed by the HBA.  These include the obligation of the Builder/Contractor to comply with the Statutory Warranties.

The Statutory Warranties include in a general sense, a warranty that:

(a)      The work will be done with due care and skill and in accordance with the plans and specifications set out in the Contract;

(c)      The work will be done in accordance and compliance with the HBA and all other laws;

(e)      If the construction consists of a dwelling, the construction works will result in the dwelling being reasonably fit for occupation as a dwelling.

We refer to our Article 11 September 2018 relating to Home Building Act Statutory Warranties Update following the decision in the case of the Owners – Strata Plan 66375 v King which was decided in the NSW Court of Appeal.  This related to in effect, an obligation of the Builder in which the Statutory Warranties appeared to be inconsistent.

The Builder does have the benefit of the possible defence as provided for in Section F of the Home Building Act. 

However Section 18F requires the Builder to diligently comply with the obligations of Section 18F and this must be throughout the building process. 

Section 18F(1) provides:

“In proceedings for a breach of statutory warranty, it is a defence for the defendant to prove that the deficiencies of which the plaintiff complains arise from:-

(a)      instructions given by the person for whom the work was contracted to be done contrary to the advice of the defendant or person who did the work, being advice given in writing before the work was done, or

(b)      reasonable reliance by the defendant on instructions given by a person who is a relevant professional acting for the person for whom the work was contracted to be done and who is independent of the defendant, being instructions given in writing before the work was done or confirmed in writing after the work was done.”

Section 18F provides a definition of “relevant professional” as referred to in (b) above.  The “relevant professional” would include a person who represents himself or herself to be a registered design practitioner or registered principal design practitioner within the meaning of the Design and Building Practitioners Act 2020, engineer or surveyor.  Further the “relevant professional” must be independent from the Builder. 

We refer to our article dated 28 July 2020 in relation to the Design and Building Practitioners Act 2020.

Builders undertaking residential building work should ensure that they comply with the procedural requirements of Section 18F to obtain the benefit of such a defence if later there are proceedings against the Builder. 

In March 2021 the Appeal Panel Civil and Administrative Tribunal of NSW (NCAT Appeal Panel) decided the Appeal by the Builder in the case of RBV Builders Pty Limited v Chedra [2021] NSWCATAP 56 and dismissed the appeal of the Builder from the Decision of Senior Member D Goldstein 24 January 2020. 

This case dealt with many issues.  Unfortunately in this case, the costs associated with the case would have been a multiple of the cost of rectification of the works. 

In this article we refer to the relevant Decision in relation to the Builder’s claimed defence under Section 18F of the Home Building Act.  In this case:

1. The Contract included plans prepared by an Engineer who was a relevant professional for the purpose of Section 18F of the Home Building Act and was independent of the Builder.
2. The Builder in the proceedings submitted was that those plans represented instructions to the Builder by the relevant professional pursuant to Section 18F(1)(b)

The Decision of the Tribunal Member at first instance that a contract drawing is not an instruction for the purpose of Section 18F.   The Tribunal Member held that at [69]

“In arriving at this conclusion I have construed an “instruction” from a relevant professional to be something that occurs after the Contract has been signed and something that occurs in the context of performing the work under the Contract”.

The Appeal Panel referred to a previous Decision of the Appeal Panel which stated in part:

“What is clear is that for a defence to succeed there must be, prior to carrying out the work, an inquiry by the Builder as to the adequacy of the design and a written instruction to proceed from the consultant”.

The Appeal Panel confirmed that in their view the “instruction” from a “relevant professional” to be something that occurs after the Contract has been signed and something that occurs in context in performing the work under the Contract.

If a Builder wants to avail itself of the possible defence, it must comply with the clear letter of the law as provided for in Section 18F defences with the overriding basis that the instruction from the “relevant professional” is something which occurs after the Contract has been signed and something that occurs in the context of performing the work.  Section 18F(1)(b) relating to the reliance on the relevant professional is an amendment which has been made to the Home Building Act in recent years. 

Prior to that, the amended defence was essentially limited to the Builder complying with the obligation as set out in 18F(1)(a) referred to above. 

Accordingly, the Builder who is instructed for example by the Owner who believes that the work carried out in accordance with those instructions would result in the works not complying with the Statutory Warranties, would have to give advice to Owner in writing before the work was done and thereafter receive instructions (in writing) to proceed with the work.

Section 18F is not just a defence for the sake of it being a defence.  It is a procedure which if followed, will allow the Owner to make a decision based on the advice from either the “relevant professional” or the Builder.

If you are a Builder undertaking residential work and you wish to protect yourself before the work is carried out you should have the contractual arrangements reviewed and seek advice in relation to the important issues that arise from entering into a Building Contract.

Similarly if you proposing to enter into a Building Contract whether it is for the construction of your new home and/or renovation works or remedial works to your Strata Complex, we strongly recommend that you seek advice prior to entering into the Contract. 

If you are involved in a dispute following entering into a Contract, you should seek expert advice in relation to the position that you find yourself in.  Please contact Richard Watson, Accredited Specialist Building and Construction or his Personal Assistant Shereen Da Gloria to discuss all aspects relating to building and construction and associated matters including all aspects relating to strata matters.

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