Rectification or damages – section 48MA of the Home Building Act 1989

Rectification or damages – section 48MA of the Home Building Act 1989

Where residential building work has been completed and is found to be defective there is almost always a tension between the builder and the homeowner as to what should happen next. The builder is usually keen to get back in and fix the work, on the basis that will cost them less. On the other hand, the homeowner often wants the work completed by a different tradesperson due to a loss of faith in the builder

In 2014 the Home Building Act 1989 was amended to provide that rectification of the defective work by the responsible party is the preferred outcome when a court or tribunal is determining a building claim. This provision has been in operation since January 2015.

Although the provision has been in operation for over 2 years, there is presently only limited case law regarding its application. Provided below are a few examples of the approach that the Tribunal has taken in application section 48MA of the Home Building Act 1989:

CASE 1

Case

Steven Miller & Anor v Grosvenor Australia Pty Ltd [2017] NSWCATCD 42

Date of decision

30 May 2017

Circumstances

This matter related to a defective glass sliding shower door. The builder had conceded that it was defective and was seeking a rectification order that the builder re-supply the glass sliding shower door (and the owners would need to install). The builder had already obtained the custom-made shower door prior to the owners terminating the contract. The owners were seeking a compensation order for both the cost of the door and its installation as they argued that the builder did not have a licence to enable the completion of the work.

Application of section 48MA

The Tribunal made the rectification order sought by the builder after considering section 48MA as the licence was not required to supply the door. It also found that the rectification order in these circumstances supported the guiding principle of the Tribunal for “just, quick and cheap resolution” as the shower door had already been fabricated and could be delivered immediately. The Tribunal then went on to determine that only $10 should be paid to the owners to facilitate installation as there was no satisfactory available evidence as to the cost of installation and the owners had not paid the builder $1,652 of their costs.

 

CASE 2

Case

Galdona v Peacock [2017] NSWCATAP 64

Date of decision

24 March 2017

Circumstances

This matter was an appeal to the NCAT Appeal Panel against a decision of a Tribunal Member that had ordered compensation. The Tribunal Member had considered issuing a rectification order however had not specifically had regard to section 48MA and that a rectification order was the preferred outcome.

Application of section 48MA

The Appeal Panel held that the Tribunal Member should have considered section 48MA and had not. Despite this the finding was still upheld on the basis that the Tribunal Member had determined:

  • the relationship between the parties had broken down;
  • the builder had not acknowledged the poor standard of the work carried out; and
  • there were severe reservations as to the ability of the builder to rectify the work with due care and skill.

The Appeal Panel found that these factors would warrant against the preferred outcome and a compensation order was appropriate in the circumstances.

 

CASE 3

Case

Brooks v Gannon Constructions Pty Limited [2017] NSWCATCD 12

Date of decision

2 March 2017

Circumstances

The builder wanted to return to complete the however had stated that:

  • whether he was ordered to pay money or be given a rectification order, either “would suck”; and
  • he had lost substantial money on the project and was now broke and without a job.

The homeowner wanted an order to pay compensation and indicated that if the builder were allowed to return to complete the works it would make him sick to his stomach. 

Application of section 48MA

The Tribunal found that the homeowner feeling sick to his stomach was not sufficient reason not to make a rectification order. Despite this finding the Tribunal still declined to make a rectification order in this matter as it felt it was not appropriate given the builder was unlikely to have sufficient funds to undertake the work.

 

Summary

These decisions indicate there are certain factors that will be relevant when determining that compensation should be paid rather than the preferred outcome of a rectification order. These factors include:

  • if the builder does not have a licence enabling completion of the work;
  • if there is a financial inability to complete the work;
  • if the relationship between the homeowner and builder has broken down;
  • where there is no acknowledgement by the builder that work is sub-standard; and
  • where the builder appears incapable of completing the work with due care or skill.

Whilst there are similar considerations throughout the cited cases, ultimately the decision to award a rectification order or compensation is a discretionary matter to be determined by the relevant  court or tribunal. In most cases no one factor will be determinative of whether to depart from the  section 48MA preferred outcome.