Recent Case – No Liability of a Builder who was engaged to complete residential building work of another Builder, evidence and knowledge of the law critical

12/07/2024

The Civil and Administrative Tribunal of New Wales Appeal Panel (NCAT Appeal Panel) in a recent Decision June 2024 has allowed an Appeal from the Decision by the original Tribunal in particular, in relation to a primary issue in the case namely, whether the second Builder was liable for damages where consequential loss arose from water penetration through windows that had been installed at the residential dwelling.

The recent case Hiperia Holdings Pty Limited (the Builder) v Sghabi (the Owner) and related case of Sghabi v Hiperia Holdings Pty Limited was decided by the New South Wales Civil and Administrative Tribunal Appeal Panel in June 2024.

Brief Facts

The original/previous Owner of the property engaged a Builder, Sydney Plumbing Construction Pty Limited t/as IMAK Homes (“IMAK”) to undertake residential building works.

IMAK went into Administration in September 2019.

In May 2020 the previous Owner made a claim on the Home Building Compensation Fund (“HBCF”) for losses based on enforcement of statutory warranties pursuant to the Home Building Act in respect of building works undertaken by IMAK.  This HBCF claim was successful and the previous Owner received compensation. 

In the case (Hiperia Holdings Pty Limited v Sghabi) the current or subsequent Owner (referred to as the Owner in the Decision) made a claim against the Builder who undertook residential works to complete the building works at the home, which had been undertaken by an earlier Builder. This work included rectification of some existing defects and to undertake other works to complete the residential dwelling.

The Owner and the Builder entered into a Contract for the residential building work to be undertaken.  The Contract between the Owner and the Builder was a Standard Form Contract with some amendments.  As it happened, some items within the Building Works, were excluded from the Contract between the original Owner and the Builder.

As can be seen from this case, the terms of the Contract are critical and similarly, the facts as to what occurred and proving the facts are critical.

The Owner’s Application was heard in November 2022 and after a Hearing, NCAT published its Decision on 14 August 2023.  In this original Hearing, the Tribunal ordered the Builder to pay the Owner the sum of $103,854.73 and to pay the Owner’s costs.  It is likely that the Owner’s costs would have been more than $100,000.

The Builder appealed each of the substantive orders and the order that the Builder pay the Owner’s costs alleging that the Tribunal made errors of questions of law in its Decision.

The Owner also sought leave to appeal, primarily in relation to a GST issue. 

In the proceedings there was a dispute as to whether the Builder undertook works which were subject to various claims made by the Owner.  The case as in most building cases, involved each party engaging Expert Building Consultants.  The Owner was making a claim against the Builder for damages, as a result of breaches of the statutory warranties under the Home Building Act (HB Act).  We refer to our earlier articles on the Home Building Act including for example, our article 12 February 2024 which sets out the statutory warranties given by Builders in Contract to do residential building work in various sections of the Home Building Act including Section 18B(1)(a) – (f).

One of the Warranties by the Builder to the Homeowner [Section 18(1)(e) of the HB Act] is that where the work consisted of the construction of a dwelling, making alterations or addition to a dwelling or repairing, renovation, decoration or protective treatment of a dwelling, is that the work will result to the extent of the work conducted, in a dwelling that is reasonably fit for occupation as a dwelling.  The other warranties in brief summary include that the work conducted, will be done with due care and skill and in accordance with plans and specifications and the law. 

If a party to the claim or defence seeks to assert a fact, they must prove that fact.  In this case, one of the critical facts was who constructed and/or installed the windows. 

Just because an item is excluded work in a Contract between a Builder and an Owner, it does not mean that the Builder did not undertake those works.  Those works could have been undertaken by way of variation to the original Scope of Works or may have been undertaken by the Builder as part of the Builder’s works, without any formal documentation.  On the other hand if work is included in the original Scope of Works, in some circumstances it may by agreement, have later been excluded.

In this case, the Owner asserted the Builder undertook the works relating to some of the windows (Window works).

The Tribunal Member who heard the original Tribunal matter allowed a sum for consequential damages by way of determining that there was a breach of the statutory warranty, and consequential losses arising from the water penetration, was allowed.  The NCAT Member who originally heard the case awarded damages of $103,854.23. 

Eventually the NCAT Appeal Panel did not accept the Owner’s submissions that the Builder undertook the Window Works.  This is an example as in many cases, that one needs the evidence to prove an asserted fact and a mere assertion of a fact is not evidence of the fact. 

The Appeal Panel did not agree and allowed the Appeal in relation to the claim for consequential loss arising from the water penetration.  The Appeal Panel allowed $35,514.45 in favour of the Owner, in place of the original figure of $103,854.73.

Further the Appeal Panel ordered that the Owner pay the Builder’s costs of the Builder’s Appeal proceedings which in our view, would be in excess of $35,000.

There was also an issue as to the external brick cavity veneer wall which resulted in water penetration.  There was evidence that the brickwork was excluded under the Building Contract dated 25 November 2019 entered into between the former registered proprietor and Builder.  The original Tribunal concluded that there was sufficient doubt that the Builder either constructed or was responsible for the brick work.

Notwithstanding the original Tribunal proceeded to award, even though it was a reduced amount, a sum in respect to the brickwork. 

The Appeal Panel reduced this amount to nil. 

The Appeal Panel in relation to the costs made the following order:

(4)      The Owner is to pay the Builder’s costs of the Builder’s Appeal proceedings.

(5)      In the Owner’s appeal proceedings, no order as to costs with the intent that each party pays their own costs of those proceedings. 

Those orders were made subject to a right of either party to seek a different Order as to costs and Orders were made for the usual procedure and if a party seeks to make such a claim, the matter will be dealt with by way of submissions.

At Watson & Watson our highly experienced Building and Construction Lawyers have been acting for Homeowners, Builders and Contractors for in excess of 30 years and can assist you in relation any matters pertaining to building and construction issues including contractual issues and obligations in relation to the statutory warranties.  Please contact Richard Watson, Accredited Specialist Commercial Litigation specialising in 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.