Australia: Residential Focus - 13 July 2016

In this edition we look at a decision of the Appeal Panel arising from a claim to recover money from a sub-contractor following breach of the statutory warranties in s 18B of the Home Building Act 1989 (NSW) (the Act).

The Builder sought to recover from the Sub-contractor an amount that the Builder had, by consent, in separate proceedings agreed to pay the homeowners for defective work allegedly carried out by the Sub-contractor. In the Tribunal below it was held that the Builder was entitled to recover the sum of $26,364 but was not entitled to legal costs as they were too remote. The Builder appealed the costs decision. The Sub-contractor also appealed.

The homeowners had sued the Builder for breach of statutory warranties under the Act in respect of the brick work undertaken by the sub-contractor. The claim was resolved by consent, with the consent orders providing that Acratex shall be applied to the whole of the brick work. The Builder incurred the cost of $26,340 in applying Acratex and sought recovery of that amount from the Sub-contractor.

Per Unity Insurance Brokers Pty Ltd v Rocco Pezzano (1998) 192 CLR 603, a builder may recover damages from the sub-contractor in subsequent proceedings by reference to the costs of the settlement of the earlier proceedings provided that the settlement was objectively reasonable. Whether a settlement is reasonable is to be judged by reference to the materials the parties had available to them at the time which the compromise was reached. The Appeal Panel confirmed the decision of the Tribunal below on liability. In reaching this decision it was recognised that there are a range of potential figures within which a settlement could be considered reasonable. The costs associated with applying Acratex to the whole of the premises fell within the spectrum of possible settlements. Further, the Sub-contractor's claim that the Builder did not mitigate failed as the evidence indicated that the homeowner would not accept the Sub-contractor back to repair.

The Builder appealed the decision that it was not entitled to the legal costs it incurred in prosecuting and defending the proceedings with the homeowner. It was submitted that the Builder should be put in the same position, insofar as money can do, as if the contract between it and the Sub-contractor had been performed. On appeal it was held that the Tribunal below had erred as a matter of law in finding that the costs the Builder incurred in the homeowners' proceedings were not fairly and naturally arising from the Sub-contractor's breach.

Despite this, it was found that the Builder failed to discharge its onus of proof as to the quantification of loss. The Builder's assertion that it was entitled to 80% of the solicitor's invoice was not sufficient to establish an entitlement to damages. Per Watts v Rake (1991) 174 CLR 54, the Appeal Panel noted that the Builder had failed to put the Appeal Panel in a position to quantify in monetary terms the damage which the Builder suffered. Although an exact amount is not required in all circumstances, in merely asserting that the legal costs incurred were approximately 80% of the solicitor's invoice, the Builder failed to provide proper evidence to allow for correct and accurate quantification of the loss. Although it was accepted that the Tribunal below erred in finding that costs were to remote to be recoverable, the failure of the Builder to prove the quantum of loss led to the appeal being dismissed.

The long awaited start date for the NSW strata reforms has been announced. Most changes will commence on 30 November 2016. Holding Redlich will be holding a second seminar in Sydney on these changes. Watch this space for dates.

In the media

Builders Busted

NSW Fair Trading's blitz on unlicensed and dishonest builders continues, with six more NSW tradies prosecuted this month. Fair Trading Commissioner Rod Stowe said the crackdown on unlicensed and dishonest builders would continue indefinitely (27 June 2016).

Builders Busted and Glendenning Builders Nailed (22 June 2016).

Practice and courts

In reviewing the situation, AIBS has undertaken a comprehensive investigation and, as a result, two documents have been developed - the report plus a detailed technical analysis (01 July 2016).

AIBS Report - Issues Relating to the Use of External Wall Cladding Systems in Australia AIBS Technical Discussion Paper - External Cladding Systems & the BCA.

The ABCB has been made aware of uncertainty among practitioners about the Deemed-to-Satisfy Provisions for maintaining the performance of fire-resisting building elements that contain penetrations for gas pipes. For more information, please visit the ABCB website. (30 June 2016).

The Department of Planning and Environment is exhibiting draft changes to the NSW Housing Code and inviting council submissions by 12 August 2016 Simplified Housing Code.

Cases

APPEAL: power of Tribunal to set aside or vary orders dismissing proceedings. APPEAL: whether discretion to set aside or vary orders should be exercised. More...

APPEAL: Home Building Act – implied warranties of sub-contractors; DAMAGES – whether amount paid to third party pursuant to consent orders recoverable as damages; DAMAGES – reasonable and necessary amount of settlement; legal costs incurred in defending other proceedings; remoteness. More...

HOME BUILDING dispute – entitlement to liquidated damages – where error by Tribunal below SLIP RULE – meaning and effect COSTS – appellant largely unsuccessful – ordered to pay 80% of the respondent's costs. More...

COSTS – indemnity costs – party/party costs – whether gross sum costs order should be made. More...

Accredited Certifier – findings of unsatisfactory professional conduct in respect of multiple complying development certificates – appropriate penalty use of sentencing statistics - question of manifestly excessive sentence. More...

PRACTICE – reference out by court of entire proceedings to referee – whether report should be adopted – earlier finding that referee correctly construed contract – consideration of remaining objections to adoption of report. More...

APPEAL – no question of law – no reason to grant leave – costs. More...

Appeal. More...

Termination of building contract at common law. More...

COSTS – where proceedings commenced in CTTT and transferred to this Court and plaintiff obtains judgment for less than $500,000 – whether commencement and continuation of proceedings in this Court was warranted (UCPR r 42.34) – whether costs should follow the event of the plaintiff's success (UCPR r 42.1). More...

Legislation

NSW

Regulations and other miscellaneous instruments

Civil and Administrative Tribunal Amendment (Fees) Regulation 2016 (2016-394) — published LW 1 July 2016.

Civil Procedure Amendment (Fees) Regulation 2016 (2016-395) — published LW 1 July 2016.

Electricity Supply Amendment (Advanced Meters) Regulation 2016 (2016-401) — published LW 1 July 2016.

For the full text of Bills, and details on the passage of Bills, see Bill.

This publication does not deal with every important topic or change in law and is not intended to be relied upon as a substitute for legal or other advice that may be relevant to the reader's specific circumstances. If you have found this publication of interest and would like to know more or wish to obtain legal advice relevant to your circumstances please contact one of the named individuals listed.