Critical Dates for Commencing of Proceedings for losses and damages for breach of Statutory Warranties provided for under the Home Building Act. When does the Statutory Period commence?

06/02/2024

Watson & Watson are highly experienced Lawyers having acted on behalf of Builders, Home Owners and Developers for many years. This includes all building issues many of which arise on a regular basis before, during or after the construction process. This article relates to building and construction agreements, Builders, Home Owners and Developers undertaking works and disputes that arise and includes matters that many of our clients were not aware of at the time they contacted us.

It is critical that at an early stage:

1. We understand the issues that arise in your particular circumstances.
2. We are informed of the factual matters concerning the issue.
3. We consider the best course of action for example, for the Homeowner and possible defences by the Builder or Contractor.
4. Assess the appropriate limitation period and Court or Tribunal in which a claim can be made.

This is the innate approach we adopt at Watson & Watson and we are experienced in all disputes that may arise in relation to construction works.  We have acted for many Owners, Builders, Consultants and others in relation to the right to bring a claim and the time limits have been paramount and critical in pursuing or defending the claim.

In a recent case of The Owners Strata Plan 64757 v Sydney Remedial Builders Pty Limited, a decision of the Supreme Court of New South Wales made 12 September 2023 has provided some clarification and assistance in the interpretation of the appropriate sections of the Home Building Act (HB Act) to determine the commencement of and consequently, the date of expiry of the limitation period.  If the claim is not commenced within the limitation period, that part of the claim will fail if issue is taken in the proceedings. You have to assume that the other party or the Court or Tribunal (NCAT) will take issue and deny the claim.

We have not set out all the circumstances and limitations of bringing claims, however this article relates to clarification in the case of The Owners Strata Plan 64757 v Sydney Remedial Buildings Pty Limited [2023] NSWSC 1129 decided 18 December 2023 relating to the meaning of completion of the works which determines the date for the commencement of the limitation period under the HB Act.

In 2011 the Home Building Act was amended to include Section 3B of the Home Building Act. 

Section 3B does not apply to a residential building which is subject to Section 3C.  Section 3C provides for determination of the date of completion of new buildings in Strata Schemes. 

Section 3B: date for completion of residential building states as follows:

(1A)    This section does not apply to residential building work to which section 3C applies.

Note: Section 3C provides for the date of completion of new buildings in strata schemes.

(1)      The completion of residential building work occurs on the date that the work is completed within the meaning of the contract under which the work was done.

(2)      If the contract does not provide for when work is complete (or there is no contract), the completion of residential building work occurs on
"practical completion" of the work, which is when the work is complete except for any omissions or defects that do not prevent the work from being reasonably capable of being used for its intended purpose.

(3)      It is to be presumed (unless an earlier date for practical completion can be established) that practical completion of residential building work occurred on the earliest of whichever of the following dates can be established for the work:

(a)      the date on which the contractor handed over possession of the work to the owner,

(b)      the date on which the contractor last attended the site to carry out work (other than work to remedy any defect that does not affect practical completion),

(c)      the date of issue of an occupation certificate under the Environmental Planning and Assessment Act 1979 that authorises commencement of the use or occupation of the work,

(d)      (in the case of owner-builder work) the date that is 18 months after the issue of the owner-builder permit for the work.

(4)      If residential building work comprises the construction of 2 or more buildings each of which is reasonably capable of being used and occupied separately, practical completion of the individual buildings can occur at different times (so that practical completion of any one building does not require practical completion of all the buildings).

(5)      This section applies for the purposes of determining when completion of residential building work occurs for the purposes of any provision of this Act, the regulations or a contract of insurance under Part 6.

The first enquiry is whether Section 3C of the Home Building Act applies and if not, Section 3B of the HB Act will apply to determine the date of completion of the residential building work and consequently, one can determine the last date by which proceedings can be filed with the New South Civil and Administrative Tribunal (NCAT) or a Court such as the Supreme Court of New South Wales or the District Court of New South Wales. 

Once we establish that Section 3B of the HB Act applies, the next enquiry under Section 3B is whether the Contract provides for determination of when the work under the Contract is completed.

The Supreme Court of New South Wales determined that if the Contract does not provide when the work is complete (or there is no Contract) then completion occurs on Practical Completion as defined by Section 3B(2) of the HB Act being “when the work is complete except for omissions or defects that do not prevent the work being reasonably capable of being used for its intended purpose”.  A clause in the Building Contract defining “Practical Completion” (as distinct from/to defining “the date of completion of works undertaken”) or if there is no Contract; does not apply in determining the date of completion of the works undertaken (Section 3B(1) of the HB Act.)

Thereafter one needs to look at Section 3B(2) of the HB Act to determine practical completion in accordance with the definition referred to in Section 3B(2) and (3) which is different to determining the meaning of practical completion as defined in the Contract.  Sydney Remedial Buildings case in its Decision 18 September 2023 clarified this position. 

It is also important to note that under Section 3B(5) of the Home Building Act that Section 3B applies for the purposes of determining when completion of residential building work occurs for the purposes of any provision of the Act, Regulations or a Contract of Insurance under Part 6 which relate to matters concerning completion of the works.  This clarifies various earlier cases in different Tribunals and Courts as to the interpretation and application of Section 3B of the Home Building Act and determining the date of “completion of the works”.

Section 3B(2) of the HB Act requires a consideration and findings based on the evidence when “practical completion” in accordance with the definition as set out in 3B(2) occurred.  However if one cannot determine that, one must consider the matters referred to in Section 3B(3) in that completion as defined in 3B(2) which by definition under 3B(2), is the date of the completion of residential work.  Accordingly one needs to consider the facts and matters and determine the earliest of the matters referred to in sub-paragraph 3 namely:

(a)      The date on which the Contractor handed over possession of the work to the Owner.

(b)      The date on which the Contractor last attended the site to carry out work (other than work the remedy any defect that does not affect practical completion) as referred to and defined in 3B(2).

(c)      The date of issue of an Occupation Certificate that authorises commencement of use or occupation of the work; and

(d)      In the case of an Owner Builder work the date that is 18 months after the issue of the Owner Builder permit for the work.

Upon the Court considering evidence and determining the factual matters in relation to those matters, then the Court can determine and make a finding as to the matters referred to above and accordingly, determine the date of completion of the works under Section 3B of the Home Building Act. The importance of this is that it applies to determine such things as the date for which the warranty period commences (or expires) under Section 18E.

The Supreme Court in the case of the Owners Strata Plan 64757 -v- Sydney Remedial Building Limited having considered those factual matters, determined the relevant facts and determined one of these dates was the date for completion of the works in accordance with the interpretation of Section 3B of the Home Building Act by the Supreme Court.  Accordingly the Supreme Court having regard to the date of filing the proceedings, found that the Plaintiff’s claim was out of time and the claim was statute barred and the claim was dismissed.

In this particular case, the costs would have been in excess of $150,000 for each party and possibly well in excess of that figure. This emphasises that proper consideration must be given to the recent case and the factual basis so as to establish the likely outcome and the risks associated with litigation before proceeding and to review the situation during the proceedings. 

As you can see, it is critical that the proper interpretation is given to Sections 3B and 3C of the Home Building Act to determine the date of completion of the work for the determination of the date in which proceedings were required to be commenced for example, under Section 18E for breach of warranty. 

At Watson & Watson our Lawyers are highly experienced in all aspects of building and constructions issues and seeking timely advice is important.  Please contact Richard Watson Accredited Specialist, Commercial Litigation in the stream of Building and Construction or his Personal Assistant Shereen Da Gloria to discuss your matter and seek appropriate 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.