Owner occupier contracts in NSW are now covered by the Security of Payment Act - but are you really entitled to make a payment claim?
From 1 March 2021, contracts between owner occupiers and builders are no longer exempt from the Building and Construction Industry Security of Payment Act 1999 (NSW) (Security of Payment Act).
Residential builders will now be able to claim progress payments and apply for adjudication under the Security of Payment Act. It is a key requirement that a construction contract between the parties exists for an entitlement to the progress payment under the Security of Payment Act.
The Home Building Act 1989 (NSW) (Home Building Act) disentitles contravening individuals from the benefit of contractual damages or remedies and renders such contracts unenforceable if certain requirements are not met. The question then arises as to whether a builder who has contravened the Home Building Act can still utilise the Security of Payment Act.
Relevant legislation
Section 10 of the Home Building Act states that a person who fails to comply with certain requirements of the Act or Regulations is unable to enforce the contract or any damages or remedies under it. These contraventions include contracting without a license or under a contract that is not in writing or does not have a sufficient description of the work to which it relates.
The object of the Security of Payment Act is to ensure any person who undertakes construction work or services under a construction contract is entitled to progress payments. The right to progress payments is stated to apply to a party that carries out construction work or provides related goods or services under a construction contract.
A grey area then arises when a contractor seeks to make a payment claim under a contract rendered unenforceable by the Home Building Act. The Court of Appeal provides guidance on the issue.
Brodyn Pty Ltd v Davenport (2004) 61 NSWLR 421
In November 2002, Brodyn entered into a contract with Dasein for Dasein to undertake concreting work for twelve townhouses. In September 2003, Dasein served Brodyn a document claiming progress payments. Brodyn disputed Dasein's entitlement to any payment. The payment claim was the subject of an adjudication which found in favour of the claimant, Dasein. Brodyn challenged the determination.
Brodyn submitted that because Dasein did not have a licence under the Home Building Act, the contract was illegal and unenforceable and so disentitled Dasein to any progress payments. In the judgement, when considering a separate issue, Hodgson JA stated that "the existence of a construction contract between the claimant and the respondent" is an essential requirement for a valid adjudication determination.
However, later in the same judgment, Hodgson JA considered the question of whether the contractor was entitlement to payment even though unlicensed and not able to enforce the contract:
"the civil consequences for an unlicensed contractor for its breach are those set out in section 10, and not any wider deprivation of remedies.in my opinion Dasein's failure to have a licence could not be a ground on which the adjudicator's determination could be considered void, or for otherwise giving relief in respect of the determination".
This may seem odd and different to reconcile, but there is a suggestion that unenforceable contracts under the Home Building Act do not become void or illegal (Alexander v Gregoriou; Trimtor Building Consultants Pty Ltd v Hilton). Thus, an unenforceable contract under the Home Building Act does not necessarily mean that there is no contract for the purpose of the Security of Payment Act.
What does this mean for you?
The recent amendments mean that residential builders can now make use of the Security of Payment Act. They will not necessarily be disentitled from doing so due to a lack of complete compliance with the Home Building Act. Home owners will also not be able to dispute payment claims solely based on a lack of compliance on the part of the builder.
In essence, home owners should:
- carry out their due diligence before entering into a contract
- ensure that all the requirements for a contract under the Home Building Act are met
- strictly comply with the timelines and content requirements in the Security of Payment Act for responding to payment claims if they wish to dispute a payment claim.
Where needed, legal advice should be sought to ensure compliance with the relevant legislation.
In the media
$2.4B boost to the economy as Government cuts red tape
for tradespersons
The Federal Government will provide a $2.4 billion boost
to the economy by cutting red tape to allow for a uniform scheme
for automatic mutual recognition (AMR) of state and territory based
occupational licences and registrations (18 March 2021). More...
Deconstructing construction data
Industries such as banking, energy and telecommunications
are opening access to their data under the new regime. This
underscores the value and sets expectations for the accessibility
of data throughout the broader economy, including the sizeable
construction industry - which produces around 9 per cent of
Australia's gross domestic product (16 March 2021). More...
Strong market confidence carries new home sales into
2021
New Home Sales increased in February 2021 to be 1.7 per
cent higher than February last year, prior to the impact of COVID
restrictions on new home sales, "stated HIA's Economist.
HomeBuilder was the catalyst for improving consumer confidence in
the housing market (12 March 2021). More...
Apartment made from waste glass and textiles showcases
"green" ceramics
Industry leaders have had a glimpse into the future -
flooring, wall tiles, kitchen and lighting features, and furniture
and artworks, made from waste glass and textiles. The 'green
ceramics', used for the first time as a construction material,
are the result of a collaboration between Mirvac and the UNSW
(SMaRT) (11 March 2021). More...
Commonwealth pours $1.2 billion more into Apprenticeship
Subsidy
Prime Minister Scott Morrison and Minister of Employment,
Michaela Cash have announced that the Boosting Apprenticeship
Commencements wage subsidy program will shift to becoming demand
driven and will be expanded for a full twelve months for new
apprentices and trainee places. To be eligible, employers will need
to engage apprentices who will need to commence before September 30
2021 (09 March 2021). More...
Strengthening apprentice support will strengthen
economy
The announcement from the Australian Government to extend
the Boosting Apprenticeship Commencements subsidy by injecting a
further $1.2billion is a welcome response to HIA's call to
ensure the class of 2020 are not left behind in these difficult
times," said Kristin Brookfield, HIA Chief Executive Industry
Policy (09 March 2021). More...
Building Surveyor Integrity Goes Under Spotlight
Building surveyors will be appointed by owners only, will
be prevented from having conflicts of interest and will have powers
to issue stop-work and rectification orders if recommended options
for regulatory reform are adopted nation-wide (09 March 2021).
More...
Trades without borders
The NSW Government is slashing red tape and removing
barriers for tradies to work across state and territory borders,
delivering a major boost for jobs and the economy (18 March 2021).
More...
Roadmap to reform rolled out for infrastructure
contributions
The NSW Government will undertake major reforms to the
infrastructure contributions system, unlocking up to $12 billion in
productivity benefits through changes to how public facilities and
services are funded through the planning system (05 March 2021).
More...
Published - articles, papers, reports
Australian Bureau of Statistics
10 March 2021 - Updated information
Building Approvals data for small geographic
areas
Building Approvals, Australia
ABCC Industry Update - 10 March 2021 Edition
Do you understand right of entry? Test your knowledge in
the March edition of Industry Update, where we look at right of
entry, delve into case studies and more. Read more here.
Temperature check: Greening Australia's warming
cities
Monash University researchers and the Australian
Conservation Foundation (ACF): 11 March 2021
The report finds: Hot summer days in Brisbane and Melbourne are
expected to regularly top 40°C by 2060-2080, and up to 50°C
in Sydney, with a phenomenon known as the Urban Heat Island (UHI)
effect likely to add several degrees on top of this in highly
vulnerable suburbs. Read more here.
Practice and courts
HIA Submissions
Stamp duty reform, buying in NSW - Building a
future (921KB) - 15 March 2021
AIBS: Public Consultation on Proposed AIBS Professional
Standards Scheme
Public consultation has now commenced for the
proposed AIBS Professional Standards Scheme for Building
Surveyors and will be open until 31 March 2021. The following
relevant documents are listed below
1. Notice of the Proposed AIBS Professional
Standards Scheme
2. The proposed AIBS Scheme Instrument
3. The AIBS Public Consultation
Document (02 March 2021)
ABCB Consultation open: Building Manuals - A response to
the Building Confidence Report
A discussion paper is now open for public consultation in
response to the Building Confidence Report.
Recommendation 20 of the Building Confidence Report (BCR) states
that each jurisdiction should require a comprehensive building
manual for Class 2 - 9 buildings to be lodged with the building
owners and made available to successive purchasers of the
buildings. Responses to questions in the discussion paper are
welcomed until 17 May 2021, using form via the ABCB's Consultation Hub (09 March
2021)
ABCB Consultation
Discussion Paper: Integrity of private building
surveyors and their role in enforcement - a response to the
Building Confidence Report
A discussion paper is now open for public consultation in response
to the Building Confidence Report (BCR) The
report made 24 recommendations for a best practice model for
compliance and enforcement, to strengthen the effective
implementation of the National Construction Code (NCC). Comment
closes 27 April 2021.
ABCB: Improvements to the code's structure and
format will be implemented for NCC 2022
To guide users through the changes, the ABCB has developed
a range of supporting resources that will be released in stages
leading up to the publication of the NCC 2022 Public Comment Draft
on 10 May 2021.
The first stage of articles and resources are being
released here.
Adoption of NCC 2022 to be delayed
The delayed adoption will also see adjustments to key
dates in the amendment cycle process for NCC 2022 to allow
stakeholders time to participate. These adjusted dates
include:
May - July 2021: NCC 2022 Public Comment Draft released for public
consultation
May 2022: NCC 2022 Preview published here.
If you have any questions regarding the delayed adoption of NCC
2022, please submit an online enquiry.
NSW Land and Environment Court
Design at the heart of new planning policy
The Explanation of Intended Effect (EIE) for the Design
and Place State Environmental Planning Policy (SEPP), proposes to
consolidate and replace existing design-focused policies, including
SEPP 65 and BASIX SEPP to ensure good design outcomes for any new
major development.
The Explanation of Intended Effect (EIE) for the Design and Place
SEPP is now on public exhibition for six weeks until March 31. For
more information and to submit feedback, visit the Design and Place SEPP.
Have your say on changes to how building design and
construction is regulated in NSW
The development of supporting regulations is the next step
on delivering on this piece of the Government's building reform
agenda, with the scheme commencing on 1 July 2021. The Design
and Building Practitioners Regulation commences on this date. Have
your say here.
Conflicts of interest - savings and transitional
arrangements
Clause 71 of the Regulation introduces savings provisions
for certain conflict of interest situations where the certifier was
appointed before 1 July 2020 and the work will be completed before
1 July 2022. The provisions relate to council-certified
developments and to developments where the certifier gave advice on
how to comply with the BCA deemed to satisfy provisions. For
all the changes, access the Amendment Regulation here.
The draft Design and Building Practitioners Regulation
2020
The NSW Design and Building Practitioners Act
2020 provisions of the Act will commence on 1 July
2021.
The draft Design and Building Practitioners Regulation includes
registration schemes for design and building practitioners and
engineers who work on multistorey, multi-unit residential apartment
buildings.
The Government will finalise the Regulations in early 2021, ready
to be implemented on 1 July 2021. Read more here.
New mandatory standards for building rectification
The standard will be reviewed and updated prior to the 1
July 2021 commencement of the Government's game changing
building reform agenda underpinned by the Design and Building Practitioners Act
2020.
The first Practice Standard will initially apply to certifiers
working on residential apartment buildings, where the majority of
problems and complaints have been received. The Practice Standard for registered
certifiers is available on the Fair Trading NSW
website.
NSW Revenue: Land Tax Build to Rent
The NSW Government is introducing a land tax discount for
new build-to-rent housing projects until 2040 and a new Housing
Diversity SEPP to provide more housing options, greater surety for
renters, boost construction and support jobs during the COVID-19
recovery.
NSW Revenue: Extension to HomeBuilder Grant
On 29 November 2020 the Australian Government Announced
an extension to the HomeBuilder
program until 31 March 2021.
Cases
NSW
Huang v The Owners - Strata Plan No
7632 (No 2) [2021] NSWCATAP
67
We order that the appellants pay the costs of the
respondent of these appeals in an amount assessed on the basis set
out in the legal costs legislation.
COSTS - appeals - held appeal proceedings were without merit and
endeavoured to re-agitate and relitigate matters previously decided
adversely to the appellants - held constituted "special
circumstances" justifying the making of a costs order.
As the respondent submitted, the appellants argued in the appeal
that there had been a failure to assess building defects under the
Home Building Act. We held that this was irrelevant.
Owners of Strata Plan No 30791 v
Southern Cross Constructions (ACT) Pty Ltd (in liquidation) (No
2) [2021] NSWCA
35
TORTS - negligence - apportionment of responsibility and
damages - adjustment to reflect concurrent wrongdoing by entity not
party to proceeding COSTS - party/party - general rule that costs
follow the event - application of the rule and discretion - where
appellant partially successful in appeal involving multiple parties
- reduction commensurate with hearing time spent on successful
aspects of appeal COSTS - party/party - orders when proceedings
involve multiple parties on appeal - allegations of concurrent
wrongdoing by respondents - appeal successful against one
respondent but not against another - appellant did not pursue
concurrent wrongdoing allegations at hearing - whether
appellant's costs in respect of the successful respondent
should be ordered against the unsuccessful respondents.
CE Coogee Development Pty Ltd v
Randwick City Council [2021] NSWLEC
1125
(1) The appeal is upheld.
MODIFICATION APPLICATION - appeal against imposition of condition -
whether substantially the same development - visual privacy -
daylight and ventilation. Architects Act 1921; Architects Act
2003.
Abdishou v Hardy
[2021] NSWCATAP 55
(1) Application for an extension of time for the filing of the
appeal refused.
APPEALS - Extension of time refused - Principles as to extension of
time - Procedural fairness - No error of law - No ground on which
leave to appeal should be granted.
Civil and Administrative Tribunal Act 2013 (NSW); Civil and
Administrative Tribunal Rules 2014 (NSW).
Home Building Act 1989 (NSW); Home Building Regulation 2014
(NSW).
Andrix Homes & Constructions Pty
Ltd v Mac & Anor [2021] NSWDC
53
BUILDING AND CONSTRUCTION - Contract - Termination -
binding and enforceable agreement - separate question.
RBV Builders Pty Ltd v
Chedra [2021] NSWCATAP
56
BUILDING AND CONSTRUCTION - Home Building Act 1989 (NSW) -
Statutory warranty - Plans and specifications - Whether
specifications included oral instructions - Defences - section 18F
- Whether contract drawings constitute an "instruction given
in writing" for the purposes of s 18F COSTS - Relevant
considerations.
Abdishou v
Hardy [2021] NSWCATAP
55
(2) Appeal dismissed. APPEALS - Extension of time
refused - Principles as to extension of time - Procedural fairness
- No error of law - No ground on which leave to appeal should be
granted.
Civil and Administrative Tribunal Act 2013 (NSW); Civil and
Administrative Tribunal Rules 2014 (NSW);
Home Building Act 1989 (NSW); Home Building Regulation 2014
(NSW).
Robinson v Hindmarsh Construction
Australia Pty Ltd [2021] NSWCATAP
51
BUILDING AND CONSTRUCTION - Home Building Act 1989 (NSW) -
statutory warranty - proceedings for breach - relevance of contract
- identification of contract to perform residential building work -
relevance to statutory warranties APPEALS - procedural fairness -
failure to give reasons - adequacy of reasons - evidence not
referred to - whether evidence important or critical to resolving
the particular issue - whether an inference could be drawn that the
evidence was overlooked.
Legislation
Bills introduced Government - 19 March 2021
Mutual Recognition (New South Wales) Amendment
Bill 2021
The new amendment reference
extends to the making of express
amendments of the Commonwealth Act if the amendments are with
respect to-(a) the matter of providing for individuals
lawfully authorised to carry on an occupation in a State to carry
on the occupation in another State or Territory.
Regulations and other miscellaneous instruments
Electricity Infrastructure Investment Regulation
2021 (2021-102) - published LW 12 March 2021
Environmental Planning and Assessment Amendment
(Inland Rail) Order 2021 (2021-103) - published LW 12
March 2021
Environmental Planning and Assessment Amendment
(Subdivision Certificates) Regulation 2021 (2021-104) -
published LW 12 March 2021
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.