Important case in relation to Statutory Warranties – Conflict between terms of Contract, DA and Statutory Warranties - Successful Appeal – Builder in Breach of Statutory Warranties

09/11/2021

Following the Decision by the Civil and Administrative Tribunal (NCAT) in October 2020, we received instructions to provide advice as to the prospects of an Appeal on behalf of the Owner.  The Owner had previously engaged other Lawyers to act on her behalf in relation to a dispute with the Builder. 

The Owner had claimed significant losses as a result of the breakdown of the relationship between the Builder and the Owner. 

The Builder separately claimed:

1. Payment for completion of stage 1 demolition of the works (after providing a credit for the Deposit paid by the Owner);
2. Payment for the cost of undertaking works concerning a concrete slab constructed as the floor of the dwelling; and
3. That the Builder had properly terminated the Building Contract and claimed his losses including loss of profit.

Essentially at the original Hearing the Senior Member at NCAT found in favour of the Builder and found against the Owner.

The Senior Member also ordered that the Owner pay the cost of the Builder in relation to the matter.

The consequence of the Orders was that the Owner would have to pay in excess of $100,000.  The Owner also had to pay her costs of the proceedings.

In November 2020 the Owner approached us and sought our opinion in relation to an Appeal against the original Decision of NCAT.

Fundamentally there were two possible areas of Appeal, namely:

1. Whether the Builder was entitled to the claimed cost of undertaking the concrete works relating to the slab partially constructed by the Builder and the related question as to whether the Builder was obliged to reimburse the Owner for the costs of the remaining works carried out by the Builder; and
2. Whether the Builder was entitled to terminate the Contract.

We considered the Decision and evidence and advised our client that in relation to the Builder’s claim for the costs associated with the concrete slab, we believed NCAT was in error and that the Owner would have good prospects of reversing the Decision that the Owner had to pay the Builder’s claimed costs relating to the concrete works and good prospects of obtaining an Order that the Builder pay the costs associated with the removal of the concrete slab by the Owner. 

Briefly:

1. The written Contract provided in part:
   1. That the Builder comply with the Contract Documents and also the DA conditions and other documents including the Construction Certificate;
   2. Clause 3 of the Contract provided that the Builder comply with the statutory warranties under the Home Building Act and comply with all relevant Australia, Standards, Laws and requires of the relevant Local Council and all statutory authorities with respect to the work;
   3. Various terms in relation to payment at the time of completion of the various stages of work which included:
      • Demolition $57,000 of which 50% was payable by way of deposit leaving a balance of $28,500; and
      • Concrete slab $28,500.
2. The DA conditions referred to construction of a timber floor.

Statutory Warranties

The Builder insisted that the work would include a concrete slab for the ground floor.  The Owner objected to this and required the Builder to comply with the Development Approval (DA) which required the construction of a timber floor.

The Builder pushed on with constructing a concrete slab notwithstanding the request of the Owner that the Builder comply with the DA.  The Owner after discovering significant works had been undertaken in preparation for pouring the concrete slab took steps to prevent the pouring of the concrete slab.  There are disputes as to what in fact happened, as often is the case.

Issues arose as there was conflict between the Contract and the statutory warranties provided for under the Home Building Act.

The Home Building Act provides that one cannot contract out of the statutory warranties.

There are recent cases in the Supreme Court including the case of the Owners – SP66375 v King in the New South Wales Supreme Court of Appeal in 2018 in which the Court considered the position in relation to circumstances, and dealt with the obligation to do work and comply with the law in respect of the work undertaken.

Having been aware of these proceedings, we advised the Owner that it was likely that an Appeal would be successful in relation to the Owner’s claim relating to the Builder being required to comply with the DA and the Builder should not have constructed or attempted to construct the slab (particularly as it was disputed by the Owner). 

Termination of Contract

As it happened, the Builder had attempted to terminate the Contract and left the site. Thereafter the Owner completed the works in accordance with the DA utilising the services of a second Builder.  These works included the demolition and removal of the unapproved works (which were not required by the Owner).  

As a consequence, the Owner was able to complete the building and to obtain an Occupation Certificate.

The second issue in the appeal to NCAT Appeal Panel related to the ability of the Builder to terminate the Contract in circumstances where:

1. The Builder had completed stage 1 demolition claiming $28,500 which had not been paid by the Owner (being $57,000 less $28,500 deposit paid); and
2. The Builder purported to Terminate the Contract.

Having considered the matter, we believed there was some prospect in successfully defending the claim by the Builder that the Contract had been correctly terminated.

Appeal Panel Decision

On behalf of the Owner, the Appeal was lodged with the Appeal Panel and the matter was heard by the Appeal Panel of NCAT. 

The Appeal Panel allowed the Appeal in relation to the breach of the statutory warranty by the Builder in attempting to undertake the concrete slab works. 

The Appeal Panel set aside the claim by the Builder for the cost of those works and directed that the matter be remitted to the NCAT for a determination as to the cost of removing the unapproved concrete slab works with the view that the amount would be payable by the Builder.

The Appeal Panel did not accept the Appeal in relation to the termination issue.

We believe there was a prospect to appeal that part of Appeal Panel relating to the termination issue to the Supreme Court of New South Wales.

Resolution by Settlement

The problem with the whole case was that the costs associated with the matter were completely out of proportion for what should have been a simple case at NCAT.

The matter has since been resolved on terms acceptable to each of the Builder and the Owner without any payment by either the Owner or Builder on account of costs incurred in any of the proceedings.  In those circumstances, the cost order made in the original NCAT proceedings that the Owner pay the cost of those proceedings was vacated with no order as to costs with the intent and on the basis that each party pay their own costs.

The consequence of the Owner appealing the initial Decision to the Appeal Panel was that she saved a considerable sum compared with what would have been payable if she had not appealed the decision.

If you have any issues in relation to any building matter please contact Watson & Watson experienced Building and Construction Lawyers.  Please contact Richard Watson or his Personal Assistant, Shereen Da Gloria to discuss your important matter and to obtain an initial opinion as to your rights, possible outcomes and also associated costs and other relevant matters to enable you to make a decision as to the course that may be adopted having regard to the options and alternatives available.

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