Owner occupier contracts now covered by the Security of Payment Act – but are you really entitled to make a payment claim?
From 1 March 2021, contracts between owner occupiers and builders are no longer exempt from the Building and Construction Industry Security of Payment Act 1999 (NSW) (Security of Payment Act).
Residential builders will now be able to claim progress payments and apply for adjudication under the Security of Payment Act. It is a key requirement that a construction contract between the parties exists for an entitlement to the progress payment under the Security of Payment Act.
The Home Building Act 1989 (NSW) (Home Building Act) disentitles contravening individuals from the benefit of contractual damages or remedies and renders such contracts unenforceable if certain requirements are not met. The question then arises as to whether a builder who has contravened the Home Building Act can still utilise the Security of Payment Act.
Section 10 of the Home Building Act states that a person who fails to comply with certain requirements of the Act or Regulations is unable to enforce the contract or any damages or remedies under it. These contraventions include contracting without a license or under a contract that is not in writing or does not have a sufficient description of the work to which it relates.
The object of the Security of Payment Act is to ensure any person who undertakes construction work or services under a construction contract is entitled to progress payments. The right to progress payments is stated to apply to a party that carries out construction work or provides related goods or services under a construction contract.
A grey area then arises when a contractor seeks to make a payment claim under a contract rendered unenforceable by the Home Building Act. The Court of Appeal provides guidance on the issue.
Brodyn Pty Ltd v Davenport (2004) 61 NSWLR 421
In November 2002, Brodyn entered into a contract with Dasein for Dasein to undertake concreting work for twelve townhouses. In September 2003, Dasein served Brodyn a document claiming progress payments. Brodyn disputed Dasein’s entitlement to any payment. The payment claim was the subject of an adjudication which found in favour of the claimant, Dasein. Brodyn challenged the determination.
Brodyn submitted that because Dasein did not have a license under the Home Building Act, the contract was illegal and unenforceable and so disentitled Dasein to any progress payments. In the judgement, when considering a separate issue, Hodgson JA stated that “the existence of a construction contract between the claimant and the respondent” is an essential requirement for a valid adjudication determination.
However, later in the same judgement, Hodgson JA considered the question of whether the contractor was entitlement to payment even though unlicensed and not able to enforce the contract:
“the civil consequences for an unlicensed contractor for its breach…are those set out in section 10, and not any wider deprivation of remedies…in my opinion Dasein's failure to have a licence could not be a ground on which the adjudicator's determination could be considered void, or for otherwise giving relief in respect of the determination”.
This may seem odd and different to reconcile, but there is a suggestion that unenforceable contracts under the Home Building Act do not become void or illegal (Alexander v Gregoriou; Trimtor Building Consultants Pty Ltd v Hilton). Thus, an unenforceable contract under the Home Building Act does not necessarily mean that there is no contract for the purpose of the Security of Payment Act.
What does this mean for you?
The recent amendments mean that residential builders can now make use of the Security of Payment Act. They will not necessarily be disentitled from doing so due to a lack of complete compliance with the Home Building Act. Home owners will also not be able to dispute payment claims solely based on a lack of compliance on the part of the builder.
In essence, home owners should:
Where needed, legal advice should be sought to ensure compliance with the relevant legislation.
Authors: Tony Britt & Ushna Bashir
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10 March 2021 - Updated information
Building Approvals data for small geographic areas
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Huang v The Owners – Strata Plan No 7632 (No 2)  NSWCATAP 67
We order that the appellants pay the costs of the respondent of these appeals in an amount assessed on the basis set out in the legal costs legislation.
COSTS – appeals – held appeal proceedings were without merit and endeavoured to re-agitate and relitigate matters previously decided adversely to the appellants – held constituted “special circumstances” justifying the making of a costs order.
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CE Coogee Development Pty Ltd v Randwick City Council  NSWLEC 1125
(1) The appeal is upheld.
MODIFICATION APPLICATION – appeal against imposition of condition – whether substantially the same development – visual privacy – daylight and ventilation. Architects Act 1921; Architects Act 2003.
Abdishou v Hardy  NSWCATAP 55
(1) Application for an extension of time for the filing of the appeal refused.
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Civil and Administrative Tribunal Act 2013 (NSW); Civil and Administrative Tribunal Rules 2014 (NSW).
Home Building Act 1989 (NSW); Home Building Regulation 2014 (NSW).
Andrix Homes & Constructions Pty Ltd v Mac & Anor  NSWDC 53
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RBV Builders Pty Ltd v Chedra  NSWCATAP 56
BUILDING AND CONSTRUCTION — Home Building Act 1989 (NSW) — Statutory warranty – Plans and specifications – Whether specifications included oral instructions – Defences – section 18F – Whether contract drawings constitute an “instruction given in writing” for the purposes of s 18F COSTS – Relevant considerations.
Abdishou v Hardy  NSWCATAP 55
(2) Appeal dismissed. APPEALS - Extension of time refused - Principles as to extension of time - Procedural fairness - No error of law - No ground on which leave to appeal should be granted.
Civil and Administrative Tribunal Act 2013 (NSW); Civil and Administrative Tribunal Rules 2014 (NSW);
Home Building Act 1989 (NSW); Home Building Regulation 2014 (NSW).
Robinson v Hindmarsh Construction Australia Pty Ltd  NSWCATAP 51
BUILDING AND CONSTRUCTION - Home Building Act 1989 (NSW) - statutory warranty - proceedings for breach – relevance of contract – identification of contract to perform residential building work – relevance to statutory warranties APPEALS - procedural fairness - failure to give reasons - adequacy of reasons – evidence not referred to – whether evidence important or critical to resolving the particular issue – whether an inference could be drawn that the evidence was overlooked.
Bills introduced Government – 19 March 2021
Mutual Recognition (New South Wales) Amendment Bill 2021
The new amendment reference extends to the making of express amendments of the Commonwealth Act if the amendments are with respect to—(a) the matter of providing for individuals lawfully authorised to carry on an occupation in a State to carry on the occupation in another State or Territory.
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Electricity Infrastructure Investment Regulation 2021 (2021-102) — published LW 12 March 2021
Environmental Planning and Assessment Amendment (Inland Rail) Order 2021 (2021-103) — published LW 12 March 2021
Environmental Planning and Assessment Amendment (Subdivision Certificates) Regulation 2021 (2021-104) — published LW 12 March 2021
The information in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, we do not guarantee that the information in this article is accurate at the date it is received or that it will continue to be accurate in the future.