BSM Lawyers create Legal Precedent in relation to HBA

11 July 2022 in Civil and Commercial Litigation and Law

The legal requirements imposed on contracts for residential building work are found in the Home Building Act 1989 (NSW).  It states that residential building work includes “work involved in the construction of a dwelling, or the repairing, renovation, decoration or protective treatment of a dwelling”.  There are implications if builder’s or contractor’s fail to comply with the contract requirements including fines, non-entitlement to damage and being barred from contractual remedies.

The civil litigation lawyers at Brander Smith McKnight recently created a legal precedent in regard to the interpretation of contract requirements under s7 of the Home Building Act (HBA).  The relevant decision was reached in Step-Up Renovations (NSW) Pty Ltd v Dyjecinska [2022] (Step-Up).

The contract requirements under the HBA and the consequences for their contravention and non-compliance are set out below. As is the importance and impact of NCAT’s (New South Wales Civil and Administrative Tribunal’s) decision in the Step Up case.

Key Contract Requirements under the HBA

The key contractual requirements for residential building work are found in s7 and 7AAA of the HBA. These requirements vary depending on the price of the contracted work. However, the crux of requirements residential building work contracts include the following:

1. be in writing, signed and dated by the parties;
2. include the names of all the parties;
3. contain a description of the work which is the subject of the contract;
4. include plans and specifications of the work to be completed;
5. include the contractors licence number; and
6. state the contract price (if a price is known).

Contracts entered into after the 1st of March 2015 which are over $20,000 are subject to other specific requirements.  Firstly, there is the requirement to include a statement of the statutory warranties that are applicable to the contracted work.  Further, there is a requirement to include the cost of relevant insurance or alternative indemnity products (6 and 6B of the HBA).

Breaches and Non-Compliance

The consequences for non-compliance or breach of contract obligations for residential building are outlined as follows.

Section 10 of the Home Building Act will prohibit builders or contractors from claiming or seeking any damages or other contractual remedies where the builder or contractor has failed to comply with Section 7 as set out above.

However, builders and contractors need to be aware that home owners will still be entitled to make a claim pursuant to the contract against the builder or contractor.

Contractors who breach or fail to comply with the requirements under the HBA may still be able to access avenues for legal relief.  Primarily, contractors in such circumstances may wish to pursue a claim for a quantum meruit, meaning “the amount deserved”.  Quantum meruit claims allow parties to recover a degree of money for partial performance of work.

The Step-Up Decision

This recent important decision was made by NCAT recently and applies to s7 of the HBA. The highly experienced civil litigation lawyers at Brander Smith McKnight contributed to this legal precedent through their meticulous preparation and persuasive arguments. It is a testament to their dedication, skill and commitment to their client, the builder Step Up Renovations.

The Context

NCAT’s decision in Step-Up concerned a dispute between a builder (the Builder) contracted to carry out residential building on a property for the property’s owner (the Owner).

The dispute concerned money the builder claimed to be owed to them from the Owner.  The Owner terminated their contract with the Builder for the works carried out, alleging that the Builder’s work was defective. The parties attempted to negotiate a settlement but were unsuccessful and the dispute was brought before NCAT for resolution. The Builder sought payment for the residential building work they carried out, while the owner claimed money from the Builder to cover the cost of rectifying the allegedly defective work.

The Issue

The essential issue relates to the Tribunal’s determination of the operation of s10 of the HBA.

In defence of the builder’s claim, the Owner alleged the contract entered into between the Owner and the Builder was in breach of various residential building contract requirements under the HBA.  While the Owner claimed the Builder was not entitled to damages or to enforce a remedy in relation to a breach of contract by the Owner.  Additionally, the Owner claimed that the contract between the parties was unenforceable.

The parties agreed that they did not sign the contract.

The Decision

NCAT found that s10(1) of the Act did not prevent the Builder from pursuing a claim against the Owner.

The Tribunal took the view that s10(1)(b) applies to the Builder “if a contract is not in writing; or does not have sufficient description of the work to which it relates”. The Tribunal held that, in this case, the contract was sufficiently in writing and had a sufficient description of the work.  This was because of the materials in the negotiations between the parties.  In particular, the reference to ‘Extension of existing house’ and drawings prepared by ‘OC innovative designs’.

Further, the Tribunal agreed with the Builder’s reliance on the court’s interpretation  of s10(1)(b) in the case of Hayward v Timilty.  In particular, the court’s following statement in regards to section 10(1)(b):

” I would interpret that subsection to mean that a failure to comply with the provisions of s7 other than those requiring the contract to be in writing and to contain a sufficient description of the work, does not necessarily make the contract unenforceable or render the builder not entitled to damages.  This interpretation makes practical sense as s10(1)(b) singles out the two most important aspects of a contract, that it be in writing and that it sufficiently describes the work.  In other words, leaving out the contractor’s licence number, for example won’t render the agreement invalid if indeed the builder is licensed”.

The Implications of the Decision

NCAT’s decision in Step-Up represents a nuanced yet important change in relation to contract requirements imposed by the HBA.

Now there is room for builders and contractors who fail to adhere to all of the specific contract requirements in the HBA to obtain relief.  Such exception exists where the contract sufficiently describes in writing the work to be completed under the contract.

Future amendments to the legal interpretation of the legislative requirements for residential building work under the HBA may continue to be made by Courts and Tribunals. The developments can be complex and cover a broad area of law. It is important that you seek legal advice prior to entering into any home building contract.  The BSM lawyers remain up to date with statutory and common law developments in all areas of construction and commercial law and will fight for your rights.

Summary

The civil litigation lawyers at Brander Smith McKnight successfully acted for the builder who received the claimed payment pursuant to the building contract. We obtained a decision which among other things clarified that a partly performed but unsigned written contract satisfied the requirements of s7 of the HBA.

Our lawyers have many years of experience and expertise acting for developers, builders and home owners in the construction area and in all commercial areas. Our lawyers remain up to date with the latest development in legislation and case law and will effectively advocate for you.

We are conveniently located in Sutherland, Parramatta, Wollongong and Sydney CBD.