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Residential Focus

06 April 2022

#Property, Planning & Development

Published by:

Nicholas Achurch

Residential Focus

Work orders vs money orders – to and from the preferred outcome

Litigants in breach of statutory warranty claims must be aware of the overarching principle, established in section 48MA of the Home Building Act 1989 (NSW) (Act), that the NSW Civil and Administrative Tribunal (Tribunal) must have regard to the principle that rectification of the defective work by the responsible party is the preferred outcome. 

Unsurprisingly, owners by and large seek money orders, whereas builders seek work orders. For a money order, the Tribunal must be satisfied that the making of a work order would be inappropriate. Harding v Horticultural Holdings Pty Ltd [2022] NSWCATCD 22 adds to the decisions which have given guidance on the application of that principle.

Background

The builder quoted for the installation of a kitchen at the owners home. On 28 October 2020, the builder issued an invoice to the owners for (among other things) a “solid timber kitchen”. The invoice was the sole contract document in evidence.

The builder had neither a licence, nor appropriate insurance cover, to carry out the works. The whole of the installation work for the kitchen was undertaken by a licensed subcontractor.

The owners alleged that the builder had breached section 18B of the Act in that the work was not carried out with due care and skill or in accordance with the plans and specifications set out in the contract (as evidenced by the invoice). In particular, the owners alleged that the kitchen installed was not a “solid timber” kitchen as the timber used was not of furniture-grade quality. The materials were said to be damaged during manufacture and the installation and the paint finish was poor.

The owners sought a money order for the removal and replacement of the kitchen. The builder preferred a work order.

General considerations under section 48MA

The Tribunal emphasised that section 48MA of the Act sets out the preferred outcome of the proceedings, which is not a mandatory outcome. The Tribunal affirmed the reasoning in the decision of Galdona v Peacock[1] which suggested that a money order should be made in place of a work order where, non-exhaustively:

  • the relationship between the parties has broken down
  • the builder has not acknowledged a poor standard of work
  • there are reservations as to the ability of the builder to rectify the work with due care and skill.

The Tribunal traversed recent case law which suggests that section 48MA is a preference and not a right of the builder[2], and that the purpose of the section is to prevent owners’ unreasonable refusal of builders carrying out rectification work.[3]

Nature and extent of the defects alleged

Although the experts for both the owners and the builder agreed that the builder’s work was poor in quality and finish, it was:

  • the builder’s position that the phrase “solid timber” was ambiguous and included milled timber and engineered wood including plywood and particle board, whereas
  • the owners’ expert was of the view that the phrase “solid timber” required timber in several components of the cabinetry, including drawers, end panels, kickboards, and loose shelves to be selected furniture-grade solid timber and referred to a higher quality product, that would result in a higher building cost. 

The Tribunal preferred the owner’s expert on this issue, finding a breach of section 18B(1)(a) of the Act and that replacement of the MDF construction with solid timber was warranted.

Application of section 48MA

The Tribunal preferred the owners’ position that a money order should be made over a work order, for the following reasons:

  • the same unlicensed subcontractor which carried out the defective work in question would be carrying out the rectification work
  • the builder had failed to rectify defects, despite accepting that there were matters that needed to be repaired or replaced
  • the builder did not show any acknowledgment that the work was defective and proposed that the same subcontractor would be engaged to carry out the rectification work, despite both experts’ opinions that the work was of poor quality
  • there was no evidence to suggest that the subcontractor acknowledged the defective work or that the subcontractor would carry out the rectification work in a manner differently to the defective work.

The Tribunal determined that in those circumstances it would not be appropriate to make a work order, as there was no evidence to persuade the Tribunal that if the subcontractor removed and replaced the subject kitchen, the outcome would be any better in terms of the quality of the work.

Conclusion

Owners and builders are reminded that section 48MA of the Act is the preferred outcome and not a mandatory outcome.

Builders seeking a work order should consider the decision as guidance towards steps they may take, in a dispute context, which will assist in persuading the Tribunal toward the preferred outcome.

The full decision can be read here.

Authors: Christine Jones & Nicholas Achurch

[1] [2017] NSWCATAP 64
[2] Kurmond Homes Pty Ltd v Marsden [2018] NSWCATAP 23 at [32]
[3] See paragraph [14].

In the media

Construction sector extends its recovery
Australia’s construction sector continues to grow in the face of growing price pressures and difficulties in attracting and retaining skilled workers (4 April 2022).  More...

Country areas are unable to cash in their popularity
A shortage of housing is preventing regional Australia from cashing in its newfound popularity. And there is no quick fix to the problem (4 April 2022).  More...

Home builders count the costs of the once in 100-year flooding
Despite the prospects of long delays, higher construction costs and lost income, home builders in flooded areas such as Jack Henderson are determined to rebuild and stay put (1 April 2022).  More...

In Australia there are more insolvencies in the construction sector than any other, and consumers are paying the price
It has been four months since Nathalie Kapuya's builder went into administration and still her land sits empty (1 April 2022).  More...

Lending for a new home remains well above pre-COVID levels
The number of new loans for the construction or purchase of new homes in Australia lifted by 1.7 per cent in February (1 April 2022).  More...

How is Australia’s current economy? A quick glance at three economic indicators
Dwelling approvals in Australia rose by a massive 43.5 per cent in February after a large drop of 27.1 per cent in January (31 March 2022).  More...

Budget supports home ownership
All levels of government have a role to play in restoring the rate of home ownership and the measures announced demonstrate that the federal government is committed to playing a bigger role (29 March 2022).  More...

Flood insurance costing $30,000 highlights which areas should not be developed for housing
Thousands of the people enduring the heartbreaking sight of their homes sinking beneath a rising brown tide across the east of NSW are doing so knowing they don't have insurance coverage (23 March 2022).  More...

Published – articles, papers, reports

Performance of Construction Index
The Australian Industry Group and HIA Australian Performance of Construction Index (Australian PCI®) improved by 3.1 points to 56.5 points, indicating further recovery in activity across the construction sector after a sharp fall over the summer holiday period. Read more here.

Deloitte – 2022 engineering and construction industry outlook
The engineering and construction industry has made a significant recovery from the 2020 recession, but it has also experienced multiple headwinds that are expected to persist. Read more here.

Australian Bureau of Statistics – business conditions and sentiments
In March 2022, 40 per cent of businesses had experienced increases in their operating expenses over the previous month compared to 24 per cent of businesses in March 2021. Read more here.

Australian Bureau of Statistics – building approvals, Australia
The number of dwellings approved in Australia rose 43.5 per cent in February, in seasonally adjusted terms. This follows a 27.1 per cent fall in January. Read more here.

Australian Bureau of Statistics – engineering construction activity, Australia
The seasonally adjusted estimate for the value of work done for the private sector fell 1.7 per cent in the December quarter to $13,386.8M. Read more here.

Cordell Construction Monthly Report
Cordell Construction Monthly provides a regular update on the number and value of construction projects that are in planning or have commenced construction across residential, community, commercial and major infrastructure developments. Read more here.

Practice and courts

Cross-border blitz boosts construction safety
WorkSafe Victoria and SafeWork NSW visited 52 construction sites in Albury and Wodonga as part of a week-long blitz to reduce the risk of falls and other safety issues. Read more here.

Cases

Brennan v Building Zone Constructions Pty Ltd [2022] NSWCATAP 96
APPEAL – failure to consider evidence of one party on the issue of quantum – decision not fair and equitable; Civil and Administrative Rules 2014; Civil and Administrative Tribunal Act 2013.

Salakis v Silvabuilt Pty Ltd; Silvabuilt Pty Ltd v Salakis (No 2) [2022] NSWCATAP 95
COSTS – usual order – costs follow the event – meaning of “event”; Civil and Administrative Rules 2014; Civil and Administrative Tribunal Act 2013.

Casazza v McGuinness [2022] NSWSC 348
CIVIL PROCEDURE – appeal and review – appeal from Local Court.
CONTRACTS – formation – identification of parties to an agreement – post-contractual conduct; Local Court Act 2007 (NSW).

Garawin Pty Ltd v 1A Eden Pty Ltd [2022] NSWSC 333
REAL PROPERTY – torrens title – caveats – application to remove caveats – Real Property Act 1900, s 74MA(2) – real property development joint venture conducted through trustee company as trustee of a unit trust – plaintiff a 50 per cent interest holder in the units in the unit trust – agreement to distribute the profits in specie in the form of lots of the development – distribution commenced but not completed – building under development the subject of defect proceedings – trust faced with unexpected external liabilities – further distribution suspended but plaintiff’s permitted to mortgage undistributed lots – freezing orders made by consent against lots to be distributed to second defendant – lots distributed to the third defendant – caveats placed on all lots respect parties – plaintiff seeks removal of caveats to enable distribution – whether caveats bad in form – what if any ancillary relief should be granted if caveats are removed; Design and Building Practitioners Act 2020; Home Building Act 1989, s 18B; Real Property Act 1900, ss 74MA(2), (3), 74P; Trustee Act 1925, s 102.

Leone v Captain Green Solar Pty Ltd [2022] NSWCATAP 78
PRACTICE AND PROCEDURE – procedural fairness – failure to give reasons – adequacy of reasons; Civil and Administrative Tribunal Act 2014 (NSW) – ss 80, 81; Home Building Act 1989 (NSW) – ss 18E, 48K(7).

Chen v Austral Built Pty Ltd [2022] NSWCATAP 67
APPEAL – error of law – scope of works in contract for residential building work – obligation of builder to provide sewer service diagram – work and services order made.

Legislation

NSW

Passed by both Houses of NSW Parliament
Home Building Amendment (Medical Gas Licensing) Bill 2022
31/03/2022 – Home Building Act 1989 No 147.

Environmental planning instruments
Blacktown Local Environmental Plan 2015 (Amendment No 31) (2022–129) LW 1 April 2022.
Coffs Harbour Local Environmental Plan 2013 (Amendment No 26) (2022–130) LW 1 April 2022.
Kempsey Local Environmental Plan 2013 (Amendment No 31) (2022–131) LW 1 April 2022.
Moree Plains Local Environmental Plan 2011 (Amendment No 7) (2022–116) LW 30 March 2022.
State Environmental Planning Policy (Precincts–Western Parkland City) Amendment (Wilton Town Centre Precinct) 2022 (2022–119) LW 30 March 2022.
State Environmental Planning Policy (Transport and Infrastructure) Amendment (Miscellaneous) 2022 (2022–132) LW 1 April 2022.
Upper Hunter Local Environmental Plan 2013 (Map Amendment No 2) (2022–133) LW 1 April 2022.
Wagga Wagga Local Environmental Plan 2010 (Amendment No 44) (2022–117) LW 30 March 2022.
Ballina Local Environmental Plan 2012 (Map Amendment No 3) (2022–106) LW 25 March 2022.
Cumberland Local Environmental Plan 2021 (Amendment No 3) (2022–107) LW 25 March 2022.
Dubbo Regional Local Environmental Plan 2022 (2022–108) LW 25 March 2022.
Ku-ring-gai Local Environmental Plan 2015 (Amendment No 28) (2022–109) LW 25 March 2022.
Mid-Western Regional Local Environmental Plan 2012 (Map Amendment No 2) (2022–110) LW 25 March 2022.
Pittwater Local Environmental Plan 2014 (Map Amendment No 2) (2022–111) LW 25 March 2022.
State Environmental Planning Policy (Precincts–Western Parkland City) Amendment (Miscellaneous) 2022 (2022–112) LW 25 March 2022.
Wakool Local Environmental Plan 2013 (Amendment No 5) (2022–113) LW 25 March 2022.
Willoughby Local Environmental Plan 2012 (Amendment No 20) (2022–114) LW 25 March 2022.

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

Published by:

Nicholas Achurch

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