06 June 2018
15 min read
Published by:
Subcontractors beware - s 18D(1A) HBA and the non-contracting owner
In AJ Gouros Investments Pty Ltd trading as Adelaide Concrete Polishing & Grinding Pty Ltd v Pongraz [2018] NSWCATAP 129 the New South Wales Civil and Administrative Tribunal (the Tribunal) Appeal Panel (the Appeal Panel) looked at whether owners could enforce statutory warranties against a party which claimed it was a subcontractor to the builder.
Facts
The owners engaged a builder to build a new home. One of the owners was employed by the builder as a sales assistant. A flooring contractor was engaged to polish exposed concrete floors to a ‘mirror finish’.
The owners commenced proceedings in the Tribunal against the flooring contractor claiming that the works were improperly completed since the concrete floor was poorly finished and had pitting.
The owners maintained they had a contract with the flooring contractor for the polishing works and that the flooring contractor owed them the statutory warranties under s 18B of the Home Building Act (the Act).
The flooring contractor argued that the polishing works were carried out properly and that the poor finish and pitting was due to the substandard quality of the concrete slab construction. Furthermore, the flooring contractor claimed that the contract for the works was not with the owners, but with the builder, and therefore challenged the owners’ ability to bring a claim against it.
At first instance the Tribunal found that the flooring contractor had breached its statutory warranties as it had not carried out the polishing works with due care and skill. Furthermore, the Tribunal held that s 18D(1A) of the Act extends the statutory warranties to ‘non-contracting owners’ (i.e. owners of the land who are not party to a contract to undertake residential building works on their land). As such, it was unnecessary to determine with whom the flooring contractor had actually contracted.
The Tribunal ordered the flooring contractor to pay the owners $18,260 in damages to rectify the poorly finished and defective concrete floor.
Appeal
The flooring contractor appealed on two grounds, arguing that:
What is a ‘non-contracting owner’?
The Appeal Panel noted that, in coming to the conclusion that the statutory warranties extend to a ‘non-contracting owner’, the Tribunal had followed the analysis of s 18D(1A) in EK Constructions Pty Ltd v Zhu [2017] NSWCATAP 102 (EK Constructions). In that case, the contractor argued that it did not have a contract with the owner, but rather with his company. The Appeal Panel held that the owner was a non-contracting owner under s 18D(1A) of the Act and was entitled to the benefit of the s 18B statutory warranties.
On appeal, the flooring contractor argued that the matter was distinguishable from the facts of EK Constructions, and that the Tribunal below had failed to consider the decision in The Owners – Strata Plan 74602 v Brookfield Australia Investments Ltd [2015] NSWSC 1916 (Brookfield). In Brookfield it was held that a ‘non-contracting owner’ must be someone who is the owner of that land, and who is not a party to the contract to do residential building work on that land. As the Appeal Panel noted:
His Honour did not consider that s 18D(1A) was intended to extend, and should not be interpreted as extending, the benefit of the warranties so as to permit an owner that has contracted with a builder (and therefore a successor in title to the owner) to make a claim for breach of statutory warranty against a subcontractor to the builder.
Whilst the Appeal Panel noted that the Tribunal did not consider Brookfield, a further difficulty arose in circumstances where the Tribunal had not determined the identity of the parties to the contract.
Who were the parties to the contract?
The Appeal Panel then sought to identify who the contracting parties were. It first acknowledged that the initial quote for the polishing works was requested by the employee owner using her work email account. The flooring contractor sent its quote to that email address, but addressed the quote to the builder. The quote was then personally signed by the employee owner and returned to the flooring contractor, and the owners paid the flooring contractor directly for the works.
On the other hand, the Appeal Panel also acknowledged that the trade supply agreement, being the terms and conditions for the supply of goods and services, was signed by the builder. The trade supply agreement stated, among other things:
The Company wishes to engage the Contractor to provide the Goods and Services and the Contractor has agreed to provide the Goods and Services on the terms set out in this document…
Despite the fact the employee owner signed the quote in her personal capacity and the owners paid the flooring contractor directly for the works, the Appeal Panel ultimately held there was no concluded contract when the employee owner returned the signed quote. Instead, the Appeal Panel found the builder had entered into a contract with the flooring contractor to carry out the polishing works on the owners’ land. However, there was no contract between the owners and the builder for that work, since the items providing for polished concrete works had been deleted from the contract between the owners and the builder via a written variation.
Were the owners non-contracting owners under s 18D(1A)?
As the only contract for the flooring work was between the builder and the flooring subcontractor, the Appeal Panel held that the owners were non-contracting owners for the purpose of s 18D(1A) of the Act and entitled to the benefit of the s 18B statutory warranties. The Appeal Panel held the Tribunal was correct in finding that the owners had the benefit of the statutory warranties, and dismissed the appeal. The Appeal Panel also noted two alternative bases for finding the flooring contractor liable – either on the basis that the builder was the undisclosed agent of the owners or based on a supply of service and corresponding breach of the consumer guarantees under the Australian Consumer Law.
What does this mean?
This case is an important reminder that the Home Building Act creates obligations even in the absence of a contract. Whilst the facts of this case are unusual, concerned sub-contractors could consider seeking assurance from head contractors that their work forms part of the head contract, if sub-contractors are seeking to avoid direct liability to owners under the s 18B statutory warranties.
Editorial: Christine Jones, Eleanor Grounds and Christopher Yong
Building sector softens as residential and commercial approvals fall again
While falling approvals point to residential building peaking, the commercial sector is in deeper strife with permits down 20 per cent over the year (30 May 2018). More...
Cladding and compliance scandal: the saga continues
While audits into cladding on high-rise buildings continue to deliver bad news, the long-awaited Shergold and Weir review of building regulations has thrown down the gauntlet to building ministers to step up and adopt a national approach to compliance and enforcement (30 May 2018). More...
Construction activity remains weak as private sector spending contracts
The ongoing spending spree by governments with big public transport projects propped up the construction sector in the first three months of the year (23 May 2018). More...
National Review of Security of Payment Laws final report released
The Turnbull Government has released the final report of the Review of Security of Payment Laws, undertaken by Mr John Murray AM. The comprehensive report makes 86 recommendations to improve consistency in security of payment legislation and enhance protections to ensure subcontractors get paid on time for work they have done, regardless of which state or territory they operate in (21 May 2018). More...
MBA: Release of Final Report Into Security of Payment Laws
Master Builders Australia welcomes the release of the report by Mr John Murray AM following a comprehensive review of various current Security of Payment regimes operating around Australia. The 300+ page report is a comprehensive contribution to what is an important issue for many participants in the building and construction industry, right up and down the supply and contracting chain (21 May 2018). More...
New South Wales
More housing options for NSW: Low Rise Medium Density Housing Code
The new Code will allow one and two storey dual occupancies, manor houses and terraces to be built under fast-track complying development approval across NSW and also promotes good design for medium density housing. Low rise medium density housing as complying development is only allowed where medium density development is already permitted under a council’s local environmental plan. The Medium Density Housing Code will commence on 6 July 2018.
Greenfield Housing Code
Starting on 6 July 2018, the new Code will be included in the State Environmental Planning Policy (Exempt and Complying Development Codes) 2008. In essence; it is a simplifying of the development process and aligning the requirements for development across Greenfield areas; the planning rules and the code are also presented in plain English to clearly explain planning rules. Note: There will be a three-year transitional period, where applicants can choose whether to use the Greenfield Code, or the new simplified Housing Code or Transitional Code (until 13 July 2019). More...
BPB: Certification data reporting - 1 month to go
Councils and A1-A3 certifiers should be preparing for the 1 July 2018 mandatory reporting date. The Board will have an education focus for the first six months after this date (1 June 2018). More...
BPB: How do the EP&A Act amendments affect your certification work now?
The Environmental Planning and Assessment Act 1979 (EP&A Act) was amended on 1 March 2018. Along with new or changed provisions, the Act has been reorganised and renumbered (31 May 2018). More...
BPB: Certifiers cannot issue CDCs for 'lead-in infrastructure'
Recent amendments to the Infrastructure SEPP now allow certain lead-in infrastructure as complying development (31 May 2018). More...
BPB: Approved online E1 CPD activity
The Board has approved CPD Training to deliver an online continuing professional development (CPD) activity for E1 (swimming pool) certifiers (28 May 2018). More...
Commonwealth
Australian Building and Construction Commissioner v Construction, Forestry, Maritime, Mining and Energy Union (Bruce Highway Separate Question Case) [2018] FCA 771
PRACTICE AND PROCEDURE – application for an order that a question of law be heard and determined separately – all parties support the application – potential for prolonged fragmentation of the trial process – application refused.
Fair Work Act 2009 (Cth) ss.494, 497, 500, 550, 569A, 793; Federal Court Rules 2011 (Cth) r 30.01
Occupational Health and Safety Act 2004 (Vic); Work Health and Safety Act 2011 (Qld) s.81.
Australian Competition and Consumer Commission v The Construction, Forestry, Mining and Energy Union (No 4) [2018] FCA 684
COMPETITION – secondary boycott – pecuniary penalties – course of conduct and totality principles – relevance to penalty of actual loss and damage occurring in secondary boycott – injunctions – compliance program – form of declarations.
COSTS – Calderbank offer – relevant factors – special consideration of regulator’s role.
COSTS – apportionment of costs.
Fair Work Act 2009 (Cth); Trade Practices Act 1974 (Cth).
Australian Building and Construction Commissioner v Hall [2018] FCAFC 83
INDUSTRIAL LAW – appeal from a judgment of the Federal Court of Australia – where the primary judge had found that the Australian Building and Construction Commissioner had failed to establish that employees of the Construction, Forestry, Mining and Energy Union, and the union itself, had contravened ss.340, 343, 355 of the Fair Work Act 2009 (Cth) – whether the primary judge erred in applying the presumptions in ss.360 and 361 of the Fair Work Act 2009 (Cth).
Kaboko Mining Limited v Van Heerden (No 2) [2018] FCA 706
PRACTICE AND PROCEDURE – interlocutory application – whether the Court should order the joinder of a person to the proceeding – where the joinder of the defendant’s insurer would avoid multiplicity of proceedings and give effect to the overarching purpose of the Court’s civil practice and procedure provisions – insurer joined as defendant - Bankruptcy Act 1966 (Cth) s.117; Corporations Act 2001 (Cth) s.562.
Granite Transformations Pty Ltd v Apex Distributions Pty Ltd [2018] FCA 725
PRACTICE AND PROCEDURE – application by first and third respondents to strike out further amended statement of claim – whether pleading sufficient to appraise first and third respondents of case against them – whether each element of each cause of action pleaded – section of further amended statement of claim struck out with leave to re-plead. Corporations Act 2001 (Cth) s.79.
New South Wales
AJ Gouros Investments Pty Ltd trading as Adelaide Concrete Polishing & Grinding Pty Ltd v Pongraz [2018] NSWCATAP 129
HOME BUILDING ACT – s.18D(1A) – residential building work – identity of the parties to contract – right of owners to claim for breach of statutory warranties as “non-contracting owners” against direct trade contractor or subcontractor to residential builder.
Chapman v Safework NSW [2018] NSWCATAD 114
ADMINISTRATIVE LAW - High Risk Work Licence – Dogging – Forklift Trucks – Bridge and Gantry Crane – renewal documents not received by applicant - whether exceptional circumstances to allow late lodgement of renewal application.
In the matter of Powerpark Systems Pty Ltd [2018] NSWSC 793
CORPORATIONS – statutory demand – application to set aside creditor’s statutory demand – demand based on judgment arising upon filing of adjudication certificate under Building and Construction Industry Security of Payment Act 1999 (NSW) – whether genuine dispute as to the existence of the debt – whether debt is subject to offsetting claim – whether “some other reason” to set aside demand – whether foreshadowed curial proceedings to quash the adjudicator’s determination for jurisdictional error of law amounts to a “genuine dispute” or “some other reason” to set aside demand.
Lucchese v McDonell [2018] NSWCATAP 120
APPEALS – building engineering and related contracts – general contractual principles – termination – accrued rights – remuneration – deposit – cost of rectification – proof of claim – departure from the rules of evidence. . CIVIL PROCEDURE – inferior tribunal – Civil and Administrative Tribunal (NSW) – multiple appeals – practice and procedure – decisions and orders – set-off of amounts found to be owed in separate appeals.
Civil and Administrative Tribunal Act 2013 No 2 (NSW), ss.3, 36, 38(2), (4), 50, 81(1), 81(2).
Civil Procedure Act 2005 (NSW), s.90(2)(a); Fair Trading Act 1987 (NSW), s.79U; Home Building Act 1989 (NSW), s.48O; Civil and Administrative Tribunal Rules 2014 (NSW), r 13.
Gregorio v Cheadle [2018] NSWCATAP 118
HOME BUILDING ACT – Statutory construction – s.18E proceedings for breach of statutory warranty – limitation period for bringing claim by a successor in title against owner builder – effect of amendment on limitation period – nature of right of successor in title under section 18C of the Home Building Act to bring proceedings for breach of statutory warranties.
GPM Constructions Pty Limited v Baker [2018] NSWCATAP 119
CONTRACT – whether building contract on foot – whether owner lost entitlement to damages for defective building work in such a case – whether the owner had failed to act reasonably or failed to mitigate her loss by not requesting the builder to return to rectify defects.
HOME BUILDING ACT – s.48MA, preferred outcome principle, relevant considerations, what order is appropriate.
FAIR TRADING ACT – s.79U – applicability in determination of claims under the Home Building Act – modifications required by Home Building Act – relevance of s.48MA of Home Building Act.
DISCRETION – order – making power under s.48O of Home Building Act – application of preferred outcome principle.
LEAVE TO APPEAL – findings of defects in building work.
Robinson v 470 St Kilda Road Pty Ltd [2018] FCAFC 84
DAMAGES – loss or damage – assessment of damages – causation – where the claim for damages was run as an “all or nothing” case – whether the primary judge erred in concluding that the consequence of the appellant’s failure to disclose its financial position was that the respondent would not have paid a sum in respect of the payment claim – where the primary judge’s conclusion at trial was open on the evidence adduced and the case as pleaded.
CONSUMER LAW – misleading or deceptive conduct – loss or damage – assessment of damages – proportionate liability – application of Competition and Consumer Act 2010 (Cth) Pt VIA, Proportionate liability for misleading and deceptive conduct – “apportionable claim” – “concurrent wrongdoer” – Tesco liability – whether the director’s liability for an act should be reduced from 100% to 50% to be shared with the company.
Hebbel Constructions Pty Limited v Bitar Pty Limited and Anor [2018] NSWSC 758
PRACTICE AND PROCEDURE – application under r 26.6 of the Uniform Civil Procedure Rules 2005 (NSW) for the discharge of a Court-appointed receiver – whether it is just and convenient for the receiver to remain in office.
Liang v Wincrest Group Pty Ltd [2018] NSWCATAP 126
APPEAL: Home building – whether denial of procedural fairness – whether apprehended bias – adequacy of reasons - whether error of law established – whether leave to appeal should be granted.
Islam v Metricon Homes Pty Ltd [2018] NSWCATAP 116
APPEAL – Costs – Gross sum costs orders.
Horvath v Heath [2018] NSWCATAP 141
APPEAL – failure to appear at Tribunal hearing – whether denial of procedural fairness – whether leave ground established – whether leave to appeal should be granted.
Contacts:
Christine Jones, Partner - Construction & Infrastructure (Dispute Resolution)
T: +61 2 8083 0477
E: christine.jones@holdingredlich.com
Stefanie Dunnicliff, Senior Associate
T: +61 2 8083 0464
E: Stefanie.Dunnicliff@holdingredlich.com
Divya Chaddha, Associate
T: +61 2 8083 0457
E: Divya.Chaddha@holdingredlich.com
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:
