Residential Focus

Licence to add defects confirmed on appeal

Last year, we looked at a decision which revisited the Onerati principle post section 18E(2) in a successor in title context. That decision went on appeal, which has recently been decided here.

To recap, in the Court below, the plaintiff owner sought to amend its claim to add:

a claim against the builder for breach of the statutory duty under section 37 of the Design and Building Practitioners Act (NSW) 2020
further defects to the breach of statutory warranty claim.

The defendant builder opposed the application to add the further defects to the statutory warranty claim on the basis that:

each new defect represented a new cause of action
each new cause of action was in pursuit of a further claim for a breach of the statutory warranties
the limitation period for bringing a claim pursuant to the statutory warranties had passed since the commencement of the proceedings.

The grounds for appeal were that the primary judge:

erred in law by concluding that there are no separate causes of action for each alleged breach of warranty contained in section 18B of the Home Building Act (NSW) 1989 (HBA) where the plaintiff is relying on rights conferred by section 18C or section 18D
ought to have concluded that a plaintiff relying on the rights conferred by section 18C or section 18D of the HBA has separate causes of action for each alleged breach of statutory warranty
should have concluded that the amendments sought by the plaintiff to introduce new claims under the HBA were statute barred by operation of sections 18E(1)(a)-(b) of the HBA and dismissed the application accordingly.

Consideration

The plaintiff was the beneficiary of a statutory warranty under the HBA. The HBA expressly provides at section 18BA(1) that a breach of a statutory warranty implied in a contract constitutes a breach of the contract.

The primary judge was correct in concluding that the amendments did not introduce any new cause of action. However, it was stated that this view should not have been reached on the basis of the rule in Onerati as that case did not address the situation of a late amendment.

In determining whether the amendments amounted to a new cause of action, the Court adopted the approach in Conquer v Boot, which was applied in Onerati and Honeywood v Munnings. This principle is that there is a single obligation to complete the building and therefore the cause of action for different damages arising out of a breach of the contract is the same.

Acknowledging that the facts were different in Onerati, the Court turned to whether the new defects were considered allegations of material fact or merely particulars. In doing so, it analysed sections 18D(2) and 18E(2) of the HBA.

Amendments to sections 18D(2) and 18E(2) of the HBA in 2006 and 2010 did not create a position where a different cause of action for each defect arises from a breach of a statutory warranty. Specifically, the amendments do not abrogate the singleness of the cause of action principle applied in Onerati and Honeywood v Munnings.

Although the amendments affected the ability of a plaintiff to sue, they did not alter the fact that the nature of the claim is the building that has not been provided following the terms of the implied contract.

Outcome

The Court dismissed the appeal, finding that:

the plaintiff’s claim was best characterised as a claim for breach of contract
in a conventional case, there is a single cause of action when a defective structure is provided, regardless of how many ways the defect manifests itself
an amendment that does nothing more than introduce further departures from the building as promised will not represent a new cause of action as it breaches the same contractual promise.

If you have any questions about this article or how the decision may impact you, please get in touch with partner Christine Jones.

Authors: Christine Jones & Jacqueline Brown

In the media

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In practice and courts

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Published – articles, papers, reports

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There was a decline of 7.2 per cent in March compared to the previous month of the sale of new homes across Australia (20 April 2023). More...

Housing Industry Association: NSW needs stamp duty reform
The Housing Industry Association’s Stamp Duty Watch report reviews the latest developments around stamp duty (20 April 2023). More...

Standards Australia: Standards Australia and OBC partner to improve fire safety in NSW
In response to the findings by the Office of the NSW Building Commissioner (OBC), Standards Australia and the OBC are partnering in an effort to improve fire safety in the state’s residential apartment buildings (18 April 2023). More...

Cases

Mulvenna v Tuan Golden Pty Ltd [2023] NSWCATAP 108
ADMINISTRATIVE LAW – particular administrative bodies – NSW Civil and Administrative Tribunal – application for leave to appeal on the basis of new evidence not reasonably available prior to the hearing at first instance – application refused – no question of principle.
Civil and Administrative Tribunal Act 2013 (NSW) and Home Building Act 1989.

Parkview Constructions Pty Ltd v The Owners – Strata Plan No 90018 [2023] NSWCA 66
BUILDING AND CONSTRUCTION – residential building work – statutory warranties under Home Building Act 1989 (NSW) – claims by owners corporation against builder and developer – whether claims statutory or contractual – whether single cause of action for breach of contract – whether amendments to introduce new defects more than six years after completion of building work should be permitted – consideration of Onerati v Phillips Constructions Pty Ltd (in liq) (1989) 16 NSWLR 730 holding that builder had res judicata defence when owners sought to raise further defects – consideration of amendments overturning result in Onerati – legislative amendments did not alter nature of claim for breach of contract – appeal from decision permitting owners corporation’s amendments dismissed.
Australian Consumer Law; Civil Liability Act 2002(NSW); Civil Procedure Act 2005 (NSW); Corporations Act 2001 (Cth); Design and Building Practitioners Act 2020 (NSW); Frustrated Contracts Act 1978; Home Building Act 1989; Home Building Amendment (Statutory Warranties) Act 2006 (NSW): Home Building Amendment (Warranties and Insurance) Act 2010 (NSW); Interpretation Act 1987 (NSW): Limitation Act 1969 (NSW); Restraints of Trade Act 1976 (NSW); Strata Schemes (Freehold Development) Act 1973 (NSW); Strata Schemes Management Act 1996 (NSW); Supreme Court Act 1970 (NSW) and Uniform Civil Procedure Rules 2005 (NSW).

Schrader v David Broach t/as David Broach Building Services [2023] NSWDC 97
BUILDING AND CONSTRUCTION – Australian Consumer Law – unconscionability – misleading and deceptive conduct – defective work – budget report – unpaid invoices – quantum merit.
CONTRACT – cost-plus contract – breach of contract – implied terms – good faith – consequence of breach – damages – whether termination by acceptance of repudiation.
Australian Consumer Law and Home Building Act 1989 (NSW).

Durastyle Homes Pty Limited v Gosling [2023] NSWCATAP 111
APPEALS – procedure – time limits – extension of time refused.
Civil and Administrative Tribunal Act 2013 (NSW) and Home Building Act 1989 (NSW).

Cuthbert v The Owners – Strata Plan No 34194 [2023] NSWCATAP 107
APPEALS – whether leave to appeal should be granted – whether leave to adduce further evidence should be granted – whether appeal should be dismissed.
Civil and Administrative Tribunal Act 2013 and Home Building Act 1989.

The Owners – Strata Plan No 97315 v Icon Co (NSW) Pty Ltd [2023] NSWSC 363
BUILDING AND CONSTRUCTION – defective sunshades on façade of residential tower – referral of issues to referee – referee to determine whether builder liable and, if so, what is the proper rectification method – referee finds builder liable in respect of structurally inadequate sunshades – referee faced with competing rectification methods – referee concludes that C Bracket Solution is proper rectification method – whether referee misconstrued contract in finding that C Bracket Solution would achieve conformity with the contract – whether referee’s findings concerning visibility of brackets perverse or based upon a failure to understand evidence – held that referee made no error of principle, and his findings of fact were clearly open to him – not appropriate to exercise discretion to reject or vary the referee’s report – motion dismissed.
Home Building Act 1989 (NSW); Supreme Court Rules 1970 (NSW) and Uniform Civil Procedure Rules 2005 (NSW).

Legislation

NSW Legislation

Legislative instrument compilation
Work Health and Safety Regulations 2011(19/04/2023) – as amended

Disclaimer
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 newsletter is accurate at the date it is received or that it will continue to be accurate in the future.

Published by:

Christine Jones

Jacqueline Brown

Residential Focus

Licence to add defects confirmed on appeal

Consideration

Outcome

In the media

In practice and courts

Published – articles, papers, reports

Cases

Legislation

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Key Contacts

Christine Jones

Residential Focus

Licence to add defects confirmed on appeal

Consideration

Outcome

In the media

In practice and courts

Published – articles, papers, reports

Cases

Legislation

Share this

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