In Roberts v Morphett Constructions Pty Ltd [2018] NSWCATAP 33, the New South Wales Civil and Administrative Tribunal (Tribunal) dismissed an appeal by an owner claiming that the builder was unable to terminate a building contract due to failure to comply with the dispute resolution clause.

Facts

The owner raised allegations of defective works and work was suspended in January 2016 while a consultant’s report was obtained. Work recommenced in February. In March a mediation was arranged with an inspector from Fair Trading NSW who issued a rectification order.

On 4 April 2016 the builder issued a progress claim, which the owner responded to by a notice listing the disputed items. The builder then issued a formal notice alleging breach of contract due to the owner’s failure to pay the progress claim as well as other amounts claimed by the builder. The notice stated payment was required within 10 business days otherwise the builder would terminate the contract. The owner failed to pay, and the builder issued a further notice terminating the contract.

Decision at first instance

The owner and the builder each commenced proceedings in the Tribunal; the owner claiming the cost of rectification of the alleged defects and the builder claiming the unpaid cost of the works. The Tribunal ordered the owner to pay the builder $112,592 and the builder to pay the owner $12,157, finding that the builder had validly terminated the contract and was entitled to the amount claimed.

The owner brought an appeal on a number of grounds, including that the Tribunal had erred in finding that the builder had been entitled to terminate the contract. The owner argued that the builder was not entitled to terminate the contract as it had not complied with the dispute resolution clause. 

Dispute resolution clause

Relevantly, clause 27 of the contract (dispute resolution clause) provided:

27. If the owner or contractor considers that a dispute has arisen in relation to any matter covered by this contract, either during the progress of the work, after completion of the work or after the contract has been terminated, that person must promptly give to the other party written notice of the items in dispute.

If the dispute is not resolved informally following such notification, the parties may confer with a mutually agreed third party whose role will be to assist in the resolution of the dispute by mediation or expert appraisal of the work.

If the parties do not agree to confer with the third party to assist in the resolution of the dispute, or if the dispute is not resolved following the assistance of such a third party, the owner may notify Fair Trading that a building dispute exists and seek the assistance of Fair Trading to resolve any dispute.

Even if a dispute has arisen the parties must, unless acting in accordance with an express provision of this contract, continue to perform their obligations under the contract so that the work is completed satisfactorily within the agreed time.


Decision on appeal

The Tribunal dismissed the appeal, finding that the dispute resolution clause did not provide a clear mechanism for the resolution of a dispute. The Tribunal held:

[The dispute resolution clause] cannot be said to require any substantive act on the part of the party receiving notice of dispute. The clause clearly does not require the parties to proceed to mediation or make notification to Fair Trading. Even if [the dispute resolution clause] is construed as imposing upon the parties a requirement that the parties attempt to resolve the dispute informally following notification of a dispute, it is impossible to give any substance to that requirement.


Furthermore, the Tribunal found that the parties had engaged in informal negotiations attempting to resolve the dispute prior to the notice being issued and there was no reason why any further obligation should have been imposed upon the parties.

Finally, the Tribunal found that there was no certainty that abiding by the dispute resolution clause would resolve the dispute. The dispute may have remained unresolved and may have required litigation in court or the Tribunal. As such, there was no prerequisite that the dispute resolution clause be followed before the builder could claim remedies for the owner’s failure to pay the progress claim.

Editorial: Christine Jones and Eleanor Grounds

In the media

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ASBEC: Expert report: Improve home energy standards or risk bigger bills, more emissions
Implementing changes in the report now could deliver Australians savings of up to $150 per household per year on energy bills, with savings more than offsetting additional capital costs. It could also deliver more comfortable homes, reduce stress on the electricity grid, and cut emissions by around 10.8 million tonnes to 2050 (08 February 2018).  More...

New South Wales

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NSW housing approvals continue to soar
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Published

Australian Bureau of Statistics
01/02/2018: Building Approvals, Australia, Dec 2017 (cat no. 8731.0).

The Bottom Line: The household impacts of delaying improved energy requirements in the Building Code
Australian Sustainable Built Environment Council (ASBEC) and ClimateWorks Australia (Interim Report) February 2018. The full report will be released in early 2018.
The report finds that simple energy efficiency changes – such as sealing air leakages, installing ceiling fans in warmer climates, and improving insulation in cooler climates – could cut energy consumption for heating and cooling by up to 51 per cent across a range of housing types and climate zones.  More...

Practice and courts

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ABCB: NCC 2019 Public Comment Draft is now available
The consultation period for proposed changes for NCC 2019 is now open and the ABCB is seeking your feedback. Full details of the changes are provided in the NCC 2019 Public Comment Draft. Feedback should be submitted using the NCC response sheet and uploaded to the online form located on the ABCB website. Submissions close 13 April 2018 (08 February 2018).  More...

ABCB: NCC 2019 Public Comment Draft addendum
An addendum has been issued for NCC 2019, Volume One - Version 1.1 (08 February 2018).  More...

Registration is now open for the 2018 NCC Information Seminars
In February and March 2018, a representative from the ABCB will be coming to a capital city near you. Don't miss out on your opportunity to hear about the following BCA initiatives: NCC 2016 Volume One amendment addressing fire safety; NCC 2019 public comment draft; The improved CodeMark scheme; and The practical development and assessment of Performance Solutions.  Register here...

Economics References Committee Inquiries
Non-conforming building products
Status: Submissions Closed Date Referred: 11 October 2016. Reporting Date: 30 April 2018.

ABCC Code for the Tendering and Performance of Building Work 2016
The Code for the Tendering and Performance of Building Work 2016 applies to companies who wish to undertake Commonwealth-funded building work. Building industry participants covered by agreements made prior 2 December 2016 have until 29 November 2018 to ensure their agreements are Code compliant.

New South Wales

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HBC Check
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Proposed Reforms for Buildings with Combustible Cladding
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Cases

Roberts v Morphett Constructions Pty Ltd [2018] NSWCATAP 33
Appeal – Home Building – dispute clause in contract – whether clause had been complied with – clause imposes no substantive requirement – no basis for stay of proceedings – Leave to appeal – interlocutory decision to refuse an adjournment – no error of principle – Content of contract – issue of fact – no error. 

B & M Mitchell Pty Ltd v Mikell Investments Pty Ltd & Divlist Pty Ltd t/as Contemporary Homes [2018] NSWCATAP 35
Appeal dismissed. Building contract – fixed price – cost plus. Applicants are builders that brought proceedings for payment by the respondent (the homeowner) of an amount said to be owing under a home building contract. Civil and Administrative Tribunal Act 2013 (NSW); Civil and Administrative Tribunal Rules 2014 (NSW).

Rockwall Constructions Pty Ltd v Nayak (No 2) [2018] NSWCATAP 32
1. A hearing on costs is dispensed with pursuant to s 50(1)(c) of the Civil and Administrative Tribunal Act 2013.
2. Rockwall Constructions Pty Ltd is to pay Srinivas Nayak and Deepti Nayak’s costs of the appeal, on the ordinary basis until 25 April 2017 and on an indemnity basis thereafter.
COSTS – r 38A – successful party – indemnity costs.
Civil and Administrative Tribunal Act; Civil and Administrative Tribunal Rules 2014; Home Building Act 1989; Legal Profession Uniform Law Application Act 2014.

Deacon v National Strategic Constructions Pty Ltd; National Strategic Constructions Pty Ltd v Deacon (No 2) [2018] NSWCATAP 31
COSTS – cl 38A – indemnity costs. Civil and Administrative Tribunal Act 2013; Civil and Administrative Tribunal Rules 2014; Home Building Act 1989.

Singh v Verdi Group Pty Ltd [2017] NSWCATCD 94
Home Building – Breach of Contract – misleading and deceptive conduct. Competition and Consumer Act (2010); Fair Trading Act 1987; Home Building Act 1989 (NSW).


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


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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 publication is accurate at the date it is received or that it will continue to be accurate in the future. We are not responsible for the information of any source to which a link is provided or reference is made and exclude all liability in connection with use of these sources.

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