The primacy of the preferred outcome

Three recent cases of the New South Wales Civil and Administrative Tribunal Appeal Panel (Appeal Panel) reinforce the primacy of s 48MA of the Home Building Act 1989 (NSW) (the Act), that is, that rectification of defective work is the preferred outcome.

Section 48MA of the Act provides:

A court or tribunal determining a building claim involving an allegation of defective residential building work or specialist work by a party to the proceedings (the responsible party) is to have regard to the principle that rectification of the defective work by the responsible party is the preferred outcome.


Thacker v Bonham
[2017] NSWCATAP 217

In Thacker v Bonham [2017] NSWCATAP 217, a handwritten settlement agreement was signed by the owner, the builder and the Fair Trading inspector onsite. The relevant part of the settlement agreement read:

Variation regarding incomplete work and defective work discussed and observed [the builder] will provide a sum of $30,000 to be paid by 24/12/15 to [the owner]. No further work is to be conducted as per agreement. I am aware if I don’t pay [the owner] will make a claim of $50,000 at the Tribunal.


The Tribunal made a work order for rectification of the defects as the builder had not been given a defects notice as required under the contract, the builder had indicated he was ready, willing and able to complete the work order and should be given the opportunity to do so. 

The owner appealed this decision to the Appeal Panel, which dismissed the appeal. The Appeal Panel held that the settlement agreement did not vary the contract so as to effectively substitute the terms of the settlement agreement for the contract. Additionally, the Appeal Panel found that the form of the settlement agreement did not restrict, but expressly provided for, further work by the builder. As a result, the settlement agreement was found to be no barrier to a work order being made under s 48MA.

White v Sunrise Pools Australia Pty Ltd
[2017] NSWCATAP 216

In White v Sunrise Pools Australia Pty Ltd [2017] NSWCATAP 216, the Tribunal found the owner had repudiated the contract and, consequently, the builder had accepted that repudiation and terminated the contract. The Tribunal then made orders that the owner pay the builder a sum of money.

The owner claimed for defects. The Tribunal held that the builder was only liable for two items. In relation to the first (regarding protruding piers), the Tribunal ordered the builder to pay the owner $726. In relation to the second (regarding unsightly finish in the concrete), the Tribunal ordered that the builder return to the site and remedy the defect.

The owner appealed the Tribunal’s decision on a number of grounds, including, relevantly, that the Tribunal made an error of law in directing the builder to return to rectify defects when the contract had been terminated.

In dismissing the appeal, the Appeal Panel held:

There is nothing in s 48MA which indicates that the provision cannot apply after a contract has been terminated. We find that it applies in such circumstances. The Tribunal correctly applied the principle in s 48MA of the Home Building Act. No error of law has been demonstrated.


Leung v Alexakis
[2018] NSWCATAP 11

In Leung v Alexakis [2018] NSWCATAP 11, the respondent was the former owner who had carried out residential building work under an owner builder permit. The property was sold to the appellants, who brought an application in the Tribunal seeking to enforce statutory warranties to fix a water leak issue in the basement and surrounding areas. 

Importantly, the respondent’s husband, Mr Alexakis, was a licensed plumber and was therefore able to do any plumbing and drainage work, and supervise others to do that work. The Tribunal made orders that the respondent at her own cost engage appropriately qualified and licensed trade persons to demolish the stormwater works and reconstruct them in accordance with the approved plans and specifications. The appellants appealed this decision.

On appeal, the Tribunal was required to consider, firstly, whether the word “party” used in s 48MA includes the holder of an owner builder permit and, secondly, to what “work” s 48MA applies.

The appellants submitted that a “party” was limited to a “builder”. The Tribunal dismissed this argument, holding (among other things) that there is no definition of the word “builder” in the Act and that the wording of s 48MA refers to a “party to the proceedings”; therefore there is no reason why “the word party should be given any meaning to limit the expression to a particular, undefined, class of parties called ‘builders’”.

The Tribunal held that “work” to which s 48MA applies includes both work done personally by a party to the proceedings and work done on their behalf or for which they were responsible.

As a result, the Tribunal allowed the appeal in part, varying the original orders as follows:

  1. The respondent at her own cost is to engage appropriately qualified and licensed trade persons to demolish the stormwater works the subject of the proceedings and reconstruct them in accordance with the approved plans; and
  2. All persons who are to carry out the specialist work are to provide written evidence to the appellants that they are suitably qualified, licensed and insured prior to any works commencing.

Commencement of strata building bond and inspection regime on 1 January 2018

The new strata building bond and inspection scheme commenced on 1 January 2018. The scheme is intended to incentivise developers to address building defects early and quickly. It requires developers to pay a building bond equivalent to 2% of the contract price in order to secure funding for the rectification of any building defects. Click here for further details on the scheme.

The scheme only applies to building contracts for residential or mixed strata properties of four storeys or more entered into from 1 January 2018. 

Commencement of Home Building Compensation Scheme on 1 January 2018

The reformed Home Building Compensation Scheme (Scheme) also commenced on 1 January 2018. The Scheme is said to reform the Home Building Compensation Fund to better protect owners against incomplete and defective works. The Scheme provides builders with a wider choice of both insurance providers and products. More details on the Scheme can be found here.

Importantly, from 1 July 2018 all builders will be required to disclose the cost of their home building compensation cover in their building contracts. Owners will be able to confirm the validity of their builder’s policy (including any previous claims on the policy) through the HBC Check

Editorial
: Christine Jones and Eleanor Grounds 

In the media

New ABCC commissioner appointed
The Australian Building and Construction Commission (ABCC) has appointed a new head following the resignation of Nigel Hadgkiss in September 2017 after breaching the Fair Work Act. Stephen McBurney will begin a five-year term as commissioner from 6 February 2018 (10 January 2018).  More...

MBA: Rise in Approvals Points to Positive Year for Construction In 2018
Total dwelling approvals increased by 0.9% in seasonally adjusted terms in November 2017, adding a tenth consecutive month of positive growth in the approvals data (09 January 2018).  More...

Home buyers to be better protected by Australian-first defect bond scheme
The Strata Building Bond and Inspections Scheme (the Scheme), the first of its kind in Australia, provides a structured process to rectify defects early in the building lifecycle. Developers will now be required to lodge a building bond, which is equal to two per cent of the contract price with NSW Fair Trading. For more information about the Strata Building Bonds and Inspection Scheme, go to www.fairtrading.nsw.gov.au (01 January 2018).  More...

New home building scheme comes into effect
Changes to the NSW Home Building Compensation (HBC) scheme commence today that will enable private insurers to enter the market and improve protections for homeowners against incomplete and defective work. All builders are required to take out cover under the HBC scheme for residential building projects costing over $20,000. Each year on average, the scheme accepts liability for 613 claims, and pays out $82.8 million. For further information visit www.sira.nsw.gov.au (01 January 2018).  More...

Update on the Fire Safety and External Wall Cladding Taskforce
Six months on, the Cladding Taskforce, comprising representatives from the Department of Finance, Services and Innovation (DFSI), the NSW Data Analytics Centre (DAC), the Department of Planning and Environment (DPE), Fire & Rescue NSW (FRNSW), the Office of Local Government (OLG), Treasury and the Department of Premier and Cabinet (DPC), has worked to address concerns over fire safety risks arising from the use of aluminium cladding on buildings in NSW (15 December 2017).  More...

Australian Bureau of Statistics
09 January 2017 - Building Approvals, Australia, Nov 2017 (cat no. 8731.0).

Practice and courts

ABCB: Adoption of NCC 2016 Volume One Amendment 1 - Key dates
19 January 2018 - The ABCB will release a preview of NCC 2016 Volume One Amendment 1 and the new Evidence of Suitability Handbook.
12 March 2018 - NCC 2016 Volume One Amendment 1 is scheduled for adoption by all States and Territories from 12 March 2018.
This amendment is the result of a Building Ministers’ direction to the ABCB to expedite completing and adopting actions involving changes to the NCC from a comprehensive package of measures for fire safety in high rise buildings developed following the Lacrosse Apartments fire in Melbourne.

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.  More...

NSW BPB December newsletter
The 'Cert Alert' newsletter is a regular digest of work by the Board, legislative updates, events, training and consultation opportunities (21 December 2017).  More...

NSW BPB:  Certification data reporting – software providers urged to get ready
Providers of specialised building certification software can start updating their products now to ensure their clients can meet the new data reporting requirements being introduced for NSW councils and accredited certifiers (21 December 2017).  More...

NSW BPB:  Data reporting – certifiers and councils should start preparing now
To strengthen certification and building regulation in NSW, local councils and A1-A3 certifiers will soon be required to report certain data on building certification to the NSW Government (21 December 2017).  More...

NSW BPB:  New process for development approvals in mine subsidence districts
Principal certifying authorities (PCAs) will soon be able to approve certain developments in mine subsidence districts (20 December 2017).  More...

NSW BPB: Strata building bond scheme commenced 1 January 2018
The new strata building bond and inspection scheme commenced on 1 January 2018.  More...

Cases

Arambewela v Castle Projects Pty Ltd [2018] NSWCATAP 14
(1) The application for costs is refused. (2) Each party is to pay their own costs.
COSTS — exercise of the discretion to award costs under r 38(2) of the Civil and Administrative Tribunal Rules 2014 where proceedings are discontinued.
Access to Neighbouring Land Act 2000 (NSW); Civil and Administrative Tribunal Act 2013 (NSW); Civil and Administrative Tribunal Rules 2014 (NSW); Home Building Act 1989 (NSW); Uniform Civil Procedure Rules 2005 (NSW).  

Sam Komadina t/as We Paint Pools v Kelleher [2018] NSWCATAP 3
(1) Leave to appeal refused. (2) Appeal dismissed. (3) The stay of the operation of order 2 made on 2 August 2017 in HB 17/15866 is lifted.
APPEAL: Swimming pool repair – orders made in absence of contractor – whether denial of procedural fairness – whether leave to appeal should be granted.

Leung v Alexakis [2018] NSWCATAP 11
(1) The appeal is allowed in part. Home Building Act 1989 – s.48MA - preferred outcome principle, applicability to work done by holder of owner-builder permit. Owner-builder permit - Authority conferred, liability to successor in title for breach of statutory warranties, work to which the statutory warranties apply. Discretion - failure to exercise, effect of preferred outcome principle in s.48MA on exercise of discretion. Section 48O - nature and extent of order making power under Home Building Act, effect of s.48O(2) permitting order even if not sought by applicant.  
Civil and Administrative Tribunal Act 2013; Civil and Administrative Tribunal Rules 2014; Fair Trading Act 1987; Home Building Act 1989; Home Building Amendment Act 2014; Home Building Regulation 2004; Home Building Regulation 2014; Interpretation Act 1987; Plumbing and Drainage Act 2011; Work Health and Safety Regulation 2011.

Denkov v Langov [2018] NSWCATAP 9
Appeal - application for leave to appeal – no question of principle.
Civil and Administrative Tribunal Act 2013; Civil and Administrative Tribunal Rules 2014 (NSW); Home Building Act 1989.

N & T Buildings Pty Ltd v Ball [2017] NSWCATAP 234
APPEAL – expert evidence – exercise of discretion – appellant unrepresented at hearing.
Civil and Administrative Tribunal Act 2013; Civil and Administrative Tribunal Rules 2014; Home Building Act 1989. 

Younan v Commissioner for Fair Trading [2018] NSWCATOD 9
HOME BUILDING – disciplinary action – whether company of which the applicant was a director failed, without reasonable cause, to comply with a rectification order - whether applicant guilty of improper conduct – what penalty should apply – COSTS – whether special circumstances – respondent acted without jurisdiction in relation to the issuing of a rectification order. 

Champion Homes Sales Pty Ltd v Commissioner for Fair Trading [2018] NSWCATAP 18
Disciplinary proceedings - “parity principle”, meaning and applicability, different penalties for licensed contractor company, directors and supervisor. Discretion - error of law, circumstances in which Appeal Panel can intervene. Civil and Administrative Tribunal Act 2013; Home Building Act 1989. 

Scharer v Giro Construction Group Pty Ltd (in Liq) (Receiver and Manager Appointed) [2017] NSWSC 1568
APPEAL – civil – appeal from the NSW Civil and Administrative Appeal Panel – Appointment of Administrator – subsequent voluntary liquidation – whether Appeal Panel omitted to deal with issue of Tribunal’s lack of jurisdiction per s.500 – whether the Appeal Panel erred in law in concluding that it was not necessary to determine whether s.440D of the Corporations Act applied to proceedings in the Tribunal – whether the Appeal Panel erred in law in concluding the consent provided by the Administrator was valid for the purposes of s.440D – whether the Appeal Panel erred in law refusing otherwise to grant leave to appeal from a costs order made in circumstances where the Senor Member was proceeding under a material error of fact – Appeal Panel erred in law in failing to deal with “jurisdiction question” raised regarding s.500 – in effect, the Appeal Panel erroneously found the Tribunal had jurisdiction – failure to determine application of s.440D – limited or qualified consent given by the Administrator in Tribunal proceedings invalid for the purposes of s.440D – leave to appeal granted. 

Azzi v Phan [2017] NSWCATAP 215
DISMISSAL OF APPEAL – withdrawal of appeal – costs – no question of principle.
Civil and Administrative Tribunal Act 2013 No 2 (NSW) – ss 55 and 60; Civil and Administrative Tribunal Rules 2014 – r 38A; Home Building Act 1989 (NSW).

Gassman v Peck [2017] NSWCATCD 90
Home Building – preferred outcome – s48MA – Breach of Statutory Warranty.
Civil and Administrative Tribunal Act 2013;  Home Building Act 1989 (NSW);  Home Building Amendment Act 2014. 

Lal v Jardak Construction Pty Ltd [2017] NSWCATAP 224
Home Building – duty to self-represented litigant – costs offer better than result – conduct of proceedings.
Civil and Administrative Tribunal Act 2013 (NSW); Home Building Act 1989 (NSW)

Ralan (Culworth) Pty Ltd v Owners Corporation SP 83405 [2017] NSWCATAP 223
Home Building – late expert evidence taking claim beyond Tribunal jurisdictional limit – exercise of procedural discretion.
Civil and Administrative Tribunal Act 2013 (NSW);  Home Building Act 1989 (NSW).

Robert Huang and Others v Dong Chen and Anor [2017] NSWSC 1699
CONTRACTS – general contractual principles – intention to enter legally binding relations.
CONTRACTS – general contractual principles – breach and defences to action for breach – non est factum.  
EQUITY – equitable remedies – specific performance. 

McPherson v Mace [2017] NSWCATAP 227
Calderbank offers, whether rejection was unreasonable – costs issues – no question of principle. Civil and Administrative Tribunal Act 2013;  Civil and Administrative Tribunal Rules 2014;  Home Building Act 1989;  Legal Profession Uniform Law Application Act 2014.

Rockwall Constructions Pty Ltd v Nayak [2017] NSWCATAP 226
APPEAL – jurisdiction – right to hearing on the merits – mitigation of loss.
Civil and Administrative Tribunal Act 2013 ss 36, 38, 55, 80, cl 10 Sch 4, cl 12 Sch 4; Civil and Administrative Tribunal Rules 2014 cl 38A; Home Building Act 1989 ss 48L, 48K; Civil Procedure Act 2005 s 91; Legal Profession Uniform Law Application Act 2014. 

My Stone Tiles Pty Ltd v Ell; My Stone Tiles Pty Ltd v Allen [2018] NSWCATAP 7
(1) The application for leave to appeal is refused. (2) The Appeal is dismissed.  Australian Consumer Law - Guarantee as to acceptable quality and fitness for disclosed purpose.

White v Sunrise Pools Australia Pty Ltd [2017] NSWCATAP 236
(1) The appellant is to pay the respondent’s costs of this appeal as agreed or assessed on the basis set out in the legal costs legislation (as defined in section 3A of the Legal Profession Uniform Law Application Act 2014).
APPEAL – Costs - Home building – Application for costs of appeal by successful respondent - Where amount in dispute more than $30,000 – Principle that costs follow the event – Whether Calderbank offer made – Whether the question of whether there was a need for the parties to be legally represented is relevant to the exercise of the costs discretion.
 LEAVE TO APPEAL – Where application for leave to appeal from costs decision at first instance already determined.
Civil and Administrative Tribunal Act 2013 (NSW); Home Building Act 1989 (NSW); Civil and Administrative Tribunal Rules 2014 (NSW).

Nutek Constructions Pty Ltd v Slotwinski (No 2) [2017] NSWSC 1814
Freezing order granted. CIVIL PROCEDURE – Interim preservation – Freezing orders.
Home Building Act 1989 (NSW); Uniform Civil Procedure Rules 2005 (NSW) r 25.14. 

Nutek Constructions Pty Ltd v Slotwinski [2017] NSWSC 1795
Freezing order set aside. INJUNCTIONS – freezing order obtained ex parte in aid of proceedings at NCAT – whether material matters not disclosed – whether freezing order should be set aside - Home Building Act 1989 (NSW).  

Legislation

Regulations and other miscellaneous instruments

Administrative Arrangements (Administration of Acts – Amendment No 4) Order 2017 (2017-756) – published LW 22 December 2017.
Home building compensation (business plan) insurance guidelines (2017-736) — published LW 22 December 2017.
Home building compensation (claims handling) insurance guidelines (2017-737) — published LW 22 December 2017.
Home building compensation (eligibility) insurance guidelines (2017-738) — published LW 22 December 2017.
Home building compensation (premium) insurance guidelines (2017-739) — published LW 22 December 2017.
Home building compensation (prudential) insurance guidelines (2017-740) — published LW 22 December 2017.
Licensee application guidelines—Home building compensation regulation (2017-741) — published LW 22 December 2017.
Statute Law (Miscellaneous Provisions) Act (No 2) 2017 (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


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 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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