Including a contractual limitation on liability is a tempting proposition to manage risk. A recent decision considered whether such a term unwittingly restricted or removed an owner’s rights under the Home Building Act 1989 (NSW) (Act) and serves as a reminder that if contractual terms restrict or remove the rights of the owners, they may be read down or held to be void.
The application to the Tribunal involved allegations defective work including in roof decking, which resulted in water ingress.
The contract relevantly provided, at clause 36.2:
The builder is not responsible for:
(a) loss or damage to the owner’s property or property for which the owner is responsible that is left on the site
(b) subject to Clause 36.2(c) any defect, structural deficiency, settlement or deterioration in the existing building except to the extent that it is caused by the builder failing to take reasonable care in carrying out the works
(c) damage to ceilings in the existing building except to the extent that it is caused by the builder failing to take reasonable care in carrying out the building works, but then only to the extent of repairing and excluding any repainting
(d) damage to paths, gardens, driveways, trees, lawns and other landscaping
(e) the restoration of areas affected by the building works to their original condition.
In making an order for damages, including in relation to the cost of rectification or replacement of damaged floors and furniture, the Tribunal below found that:
Section 18G of the Act provides that a provision of a contract that purports to restrict or remove rights of a person in respect of the operation of the statutory warranties under section 18B, is void.
The Builder appealed on the following grounds:
The focus of our article will be the first ground, the s. 18G issue.
The Builder argued that the Tribunal erred in determining that the effect of clause 36.2 was to restrict the rights of the owner to damages for breach of the statutory warranties under s. 18B(1) and that the clause had a legitimate basis in freedom of contract.
The Appeal Panel held that the Tribunal below correctly found that clause 36.2(c) and (e) did restrict the operation of the statutory warranties under s. 18B(1) of the Act.
The restriction in clause 36.2(c) was found to operate in three ways:
The restriction in clause 36.2(e) appeared to restrict a right under s. 18B(1) of the Act in circumstances where replacement rather than repair is considered appropriate.
The contract allowed clause 36.2 (b), (c) and (e) to be read down to the extent they are impermissible, however clause 36.2(a) could restrict or remove the right provided by a statutory warranty and may thus be rendered void by s. 18G of the Act.
Section 18G is powerful in its protection of the statutory warranties under the Act, which cannot be ‘undone’ in contract, regardless of whether relevant contractual terms are agreed in ‘freedom of contract’.
Builders should consider whether standard terms and in particular, their favourite special conditions, operate to restrict or remove the rights of owners under s.18B(1).
Given that offending terms will be either read down or rendered void, builders should consider pricing in the risks they are seeking to exclude, so that their bargain reflects the deal they may be held to have made, if their contract is reviewed by the courts or the Tribunal.
Authors: Christine Jones and Nicholas Achurch
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Capitalink Pty Ltd v Whitnall  NSWDC 396
CIVIL PROCEDURE – costs - security for costs – plaintiff as trustee company – suit against guarantor arising from the principal builder’s alleged failure to complete construction works - plaintiff’s reliance upon right of indemnity and proposed arrangements to secure right of indemnity through proposed charge and deed of priority – whether security adequate as alternative to ‘cash’ security ordered by the Court – consideration of quantum
Nu-Stone Building Pty Ltd v McInerney  NSWCATAP 285
BUILDING AND CONSTRUCTION – calculation of damages
Shoostovian v Commissioner for Fair Trading  NSWCATOD 93
HOME BUILDING ACT – Fit and Proper person – whether person of good repute – disqualification – consumer protection – seriousness of offending
The Owners - Strata Plan No 47383 v McCullum  NSWCATAP 283
LAND LAW – Strata title – By-laws – Whether installation of structure permitted by by-law
The Owners - Strata Plan No 90018 v Parkview Constructions Pty Ltd  NSWSC 1123
BUILDING AND CONSTRUCTION – residential building work – whether separate causes of action for each breach of the statutory warranties under the Home Building Act 1989 (NSW) – whether single cause of action for all breaches of those statutory warranties or for each individual statutory warranty – application of Onerati principle
Trinvass Pty Ltd and Anor v Connect Infrastructure Design Pty Ltd  NSWDC 394
BUILDING AND CONSTRUCTION – Contract – Implied terms – Australian Consumer Law – CONSUMER LAW – False or misleading representations – Representations about goods or services
Regulations and other miscellaneous instruments
Associations Incorporation Regulation 2022 (2022-522) – published LW 31 August 2022
Conveyancing (Sale of Land) Regulation 2022 (NSW) – commenced 26 August 2022
Biosecurity Order (Permitted Activities) Amendment Order 2022 (No 2) (2022-529) – published LW 2 September 2022
Building and Construction Industry Long Service Payments Regulation 2022 (2022-523) – published LW 31
Environmental Planning and Assessment Amendment (Notice Requirements) Regulation 2022 (2022-530) – published LW 2 September 2022
Environmental Planning and Assessment Amendment (Sustainable Buildings) Regulation 2022 (2022-520) – published LW 29 August 2022
Explosives Amendment (Exemptions) Regulation 2022 (2022-531) – published LW 2 September 2022
Independent Pricing and Regulatory Tribunal Regulation 2022 (2022-524) – published LW 31 August 2022
State Environmental Planning Policy (Transport and Infrastructure) Amendment (Intertrade Industrial Park) 2022 – commenced 26 August 2022
Subordinate Legislation (Postponement of Repeal) Order (No 2) 2022 (2022-525) – published LW 31 August 2022
Surveillance Devices Regulation 2022 (2022-526) – published LW 31 August 2022
Treasurer’s Direction TD22-27 - Amendment to TD 21-04 (2022-538) – published LW 2 September 2022
Water Sharing Plan for the Murray Alluvial Groundwater Sources Amendment Order 2022 (2022-537) – published LW 2 September 2022
Environmental Planning Instruments
Campbelltown Local Environmental Plan 2015 (Map Amendment No 7) (2022-532) – published LW 2 September 2022
State Environmental Planning Policy (Exempt and Complying Development Codes) Amendment (Change of Use) 2022 (2022-528) – published 1 September 2022
State Environmental Planning Policy (Sustainable Buildings) 2022 (2022-521) – published LW 29 August 2022
State Environmental Planning Policy Amendment (Inner West) 2022 (2022-527) – published LW 31 August 2022
Sydney Local Environmental Plan 2012 (Map Amendment No 1) (2022-533) – published LW 2 September 2022
The Hills Local Environmental Plan 2019 (Map Amendment No 1) (2022-534) – published LW 2 September 2022
Tweed Local Environmental Plan 2014 (Map Amendment No 1) (2022-535) – published LW 2 September 2022
Woollahra Local Environmental Plan 2014 (Amendment No 25) (2022-536) – published LW 2 September 2022
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.