No Builder’s Licence was no barrier to Work Order! What?

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An appeal in the New South Wales Civil and Administrative Tribunal has confirmed the limited circumstances in which the Tribunal will make a money order rather than a work order for rectification of defective building works.

In Precise Builders (NSW) Pty Ltd v Jones & Krel [2018] NSWCATAP 112 the Tribunal Appeal Panel, having regard to s 48MA of the Home Building Act 1989 (NSW), determined that defective building work should be remedied by way of a work order, as opposed to a money order, even though the contracting builder did not hold a licence to complete such works.

The relevant provision of the Act reads:

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.

Background

The owners (Jones and Krel) contracted the builder (Precise Builders Pty Ltd) to carry out residential building work. The owners subsequently applied to the Tribunal seeking a money order for $28,000 against the builder as damages for cracking to a brick parapet wall above the garage. The cracking was caused by a defective steel beam which supported the wall – the beam was neither designed or manufactured by the builder.

The Tribunal ordered rectification works to the owners’ property as opposed to the money order sought.

The builder appealed, seeking to have the work order replaced with a money order for $18,845.84, being the rectification costs assessed by an expert quantity surveyor and provided in evidence during the Tribunal hearing. The grounds of appeal included that:

  • the Tribunal’s decision was not fair and equitable;
  • the parties preferred a damages award rather than the work order (notwithstanding that the owners initially sought $28,000);
  • the builder did not hold a licence to carry out the remedial work nor could it provide Home Warranty Insurance for the work – a money order would facilitate rectification by licensed / insured builders who specialised in remedial work;
  • the defect arose because of the engineer’s specifications and was not attributable to the builder;
  • a work order would exacerbate an already-tense relationship between the parties.

The decision

The appeal was dismissed, and the work order upheld.

The Tribunal determined that although ‘it does not have to order the preferred outcome [set out under the Act] … in order not to do so some persuasive reason or evidence is required … to rebut the presumption. Such an assessment is objective ‘and the Tribunal must weigh up the factors in each case and make the decision accordingly.’

To challenge a deviation from this preference requires evidence of a significant error or injustice in exercising the discretion, such that the decision-maker has acted upon an incorrect principle or been guided by irrelevant or superfluous matters.

Although the builder’s licence lapsed in 2014, the Tribunal noted that it was properly licenced at the time the work was undertaken and that the defect constituted a ‘major defect’ under s 18E of the Act.

Whilst the builder was not ‘itself responsible for the defective beam and the resulting damage there was a breach of the statutory warranty in s18B(1)(e) of the Act.’

The Tribunal upheld the order for the builder or licensed contractors on its behalf, to return to the owners’ property and carry out the rectification work.

The Tribunal’s reasoning

The Tribunal reiterated the policy objective of the Act, namely to ensure that owners are afforded the benefit of the statutory warranties contained therein. Consequently, if a contracting party enters into a contract with a licenced third-party builder to carry out remedial work, it satisfies the obligations contained in the Tribunal’s orders and the owners retain the protection of the implied warranties under the Act as non-contracting owners pursuant to Schedule 1.

Both parties in this case were in favour of a money order, the owners clearly stating that they would prefer not to have the builder return to carry out the rectification work. Despite this, and the fact that the builder had allowed its licence to lapse and was not properly licensed to perform the rectification work, the Tribunal considered it appropriate to uphold the work order.

Conclusion

The case reiterates the Tribunal’s approach in preferring a work order over a money order for rectification of defective building works.

Builders who have contracted to do work that is found defective (whether or not the defect is attributable to the builder) will likely need to stay around to carry out the repairs (or at least supervise them) rather than paying out an aggrieved owner. Owners and builders may therefore need to extend a period of tolerance whilst remedial works are performed.

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