In New South Wales, statutory warranties play a crucial role in building contracts, providing essential protection to homeowners. These warranties, mandated under the Home Building Act 1989 (NSW), ensure that builders adhere to specific standards of workmanship, materials, and structural integrity. safeguarding their investment and ensuring remedial action if the construction does not meet the stipulated standards.
The insights provided here are derived from a recent case our firm successfully handled, reflecting real-world applications and enforcement of these warranties.
The Facts
In 2021, the Owners entered a contract (‘the Building Contract’) with the Builder for the construction of a dwelling and a driveway on the Owners’ land. After obtaining development consent and a construction certificate, the Builder commenced works in 2022. The works were to be completed within 30 weeks.
Disputes later arose between the parties as to both the construction of the dwelling and of the driveway. In relation to the dwelling, the Owners alleged that the Builder had failed to commence and complete the works within 30 weeks, in breach of the Building Contract. In relation to the driveway, there was a dispute as to whether the Builder was required to construct the driveway prior to the Owner’s construction of adjacent retaining walls, or vice versa. Consequently, in 2023, the Owners rendered a breach notice to the Builder.
In an attempt to resolve the disputes, the Owners and the Builder entered a deed of settlement and variation which provided that:
- the Owners would waive the delay claim they had against the Builder arising out of the Building Contract;
- the parties agreed to vary the Building Contract such that the Builder would be responsible for completing all works associated with the construction of the driveway, including the retaining walls; and
- such works must be completed within 6 weeks from the date of the deed of settlement is signed.
The Owners later claimed that the driveway was only completed in or about June 2024 and that because it did not meet relevant regulatory requirements, an Occupation Certificate could not be obtained in relation to the dwelling. Consequently, the Owners alleged that the Builder was in breach of its obligation under the Building Contract to complete the driveway works within 6 weeks of exchange.
The Owners further alleged that throughout the course of the construction works, the Principal Certifier they engaged had failed to attend the premises to conduct inspections and that they only conducted such an inspection in June 2024, after their licence had been suspended.
Finally, the Owners alleged that the Engineers were at fault for approving of a dwelling and driveway design which did not meet the standards necessary to obtain an Occupation Certificate.
The Owners sought advice on whether they had any viable claim against the Builder, the Certifier, and/or the Engineer.
Claims Against the Builder
In relation to the Builder, the primary issue was whether and if so, to what extent, the deed prevented the Owners from bringing an action against the Builder.
In New South Wales, s 18B(1) of the Home Building Act 1989 (NSW) (‘HBA’) implies several warranties into every contract to do residential building work. These include warranties by the builder that:
(a) the work will be done with due care and skill and in accordance with the plans and specifications set out in the contract,
(b) all materials supplied by the holder or person will be good and suitable for the purpose for which they are used and that, unless otherwise stated in the contract, those materials will be new,
(c) the work will be done in accordance with, and will comply with, this or any other law,
(d) the work will be done with due diligence and within the time stipulated in the contract, or if no time is stipulated, within a reasonable time,
(e) if the work consists of the construction of a dwelling, the making of alterations or additions to a dwelling or the repairing, renovation, decoration or protective treatment of a dwelling, the work will result, to the extent of the work conducted, in a dwelling that is reasonably fit for occupation as a dwelling,
(f) the work and any materials used in doing the work will be reasonably fit for the specified purpose or result, if the person for whom the work is done expressly makes known to the holder of the contractor licence or person required to hold a contractor licence, or another person with express or apparent authority to enter into or vary contractual arrangements on behalf of the holder or person, the particular purpose for which the work is required or the result that the owner desires the work to achieve, so as to show that the owner relies on the holder’s or person’s skill and judgment.
Relevant to the present case was the warranty implied by s 18B(1)(d) of the HBA that the Builder’s work will be done with due diligence and within the time stipulated in the Building Contract. S 18G of the HBA provides that s 18B warranties cannot be excluded by the parties; a term in any instrument – such as a contract or deed – that purports to exclude such a warranty will be invalid. In light of this, it can be inferred that the Owners’ waiver of any delay claims against the Builder is confined to only those delay claims arising from the Builders’ breach of express terms in the Building Contract; the Owners’ claims against the Builder for breaches of any s 18 warranties are unaffected by the operation of the deed. As such, the Owners could take action against the Builder for breach of a s 18B warranty.
Claims Against the Engineer and/or the Certifier
S 37 of the Design and Building Practitioners Act 2020 (NSW) (‘DBPA’) imposes a statutory duty on a person who carries out construction work to exercise reasonable care to avoid economic loss caused
by defects, such as the cost of rectifying such defects. Per University of Sydney v Multiplex [2023] NSWSC 383, the duty is imposed on a person who has control over the construction works, or has the ability or power to control how the work was carried out. While there was insufficient information in the present case to determine whether the Certifier or the Engineer exercised the requisite control over the construction works so as to be subject to the s 37 duty, its existence is worth noting.
Conclusion
It is therefore important for land owners who have entered contracts for residential building works to be aware of the non-excludable statutory protections afforded to them under the HBA and the DBPA. In circumstances where an owner otherwise has no claim against a builder, certifier or engineer, the warranties implied into the contract by 18B of the HBA and the duty of care imposed on those carrying out construction works by s 37 of the DBPA might provide a pathway to relief.
Disclaimer:
Please note that this article is intended for general information purposes only and should not be considered as legal advice. The information provided herein is based on general legal principles and may not apply to specific factual or legal circumstances. If you require legal advice or guidance tailored to your situation, we strongly encourage you to contact our firm directly and engage our services. Reliance on the contents of this article without seeking professional counsel is not recommended.