Building Contracts – Can I Sue for Damages if the Contract hasn’t been terminated?

When to Sue?

In Home Building disputes, a Home Owner may be entitled to recover damages from the Builder for defective and incomplete work even if the building contract has not been properly terminated or has come to an end. A Builder in reply would argue that, unless the contract has been terminated, the Owner is not entitled to claim damages to rectify defects or to finish incomplete works.

The Court of Appeal decision in Brewarrina Shire Council v Beckhaus Civil Pty Ltd & Or [2005] NSWCA 248, is often relied upon as the authority for the proposition that while the contract remains on foot, damages are not available as a remedy. The Court of Appeal in Brewarrina held as follows (our emphasis):

“66 An important part of the Council’s case at trial was that Beckhaus at no stage achieved practical completion of either Separable Portion A or B. Master Macready upheld this assertion and, for reasons that I later set out, I have come to the same conclusion.

67 Accordingly, as at the judgment date, the Council rightly denied that practical completion had been achieved. But, it continued – at that stage – to hold Beckhaus to its contractual obligations to perform the work. Thus, on the Council’s contention, at the date of judgment, the work remained in Beckhaus possession; the Council, in effect, having refused to accept possession.

68 While, on this assumption (the Contract still being on foot), the Council may have been entitled to claim damages for delay arising out of Beckhaus failure to achieve practical completion by the date for practical completion, it could not sue Beckhaus for defective or incomplete work. As long as the Council maintained that the Contract was alive and had not been terminated, and held Beckhaus to its obligation to complete the work in accordance with the specification, on its contention the work remained lawfully in Beckhaus’ possession. In other words, it was an inevitable incident of the Council’s argument that the work had not been delivered to and accepted by the Council (Beckhaus – on the Council’s argument – being in possession of and obliged to complete the work). While the work was in Beckhaus possession, the Council suffered no loss by reason of defective or incomplete work; the work, not being in the Council’s possession, did not at that stage form part of its patrimony.

69 This situation would have changed when the Contract was terminated. When that occurred, the work (in its defective and incomplete state) was handed over to the Council. At that stage, the Council suffered loss by being in possession of defective and incomplete work.”

The decision in Brewarrina suggests that if building work has not reached practical completion, the Owner is not entitled to damages because the contract is still ongoing and the Owner hasn’t suffered loss for any defective or incomplete work. The case provides a defence for the Builder basicaly along the lines that unless practical completion has been reached or the Building Contract has been terminated, the Owner cannot seek damages.

It is not hard to see that Brewarrina might have serious implications for Owners who assumed the Contract was finished because the Builder failed to return to the site to complete the building work. The Owner may not have read the contract closely, and may not have followed the procedure to terminate the Contract.

When facing that response by a Builder, the Owner needs to remember that the Brewarrina case was distinguished in the context of home building matters in NSW. The NCAT Appeal Panel, in its decision of Integrity Homes Pty Ltd v Staniland [2015] NSWCATAP 284 (24 December 2015) held that the Brewarrina did not apply in home building matters where the Tribunal’s powers to award damages under the Home Building Act 1989 for breach of statute warranty. Brewarrina involved a commercial construction project, not residential dwelling building work so the Home Building Act 1989 did not apply to the construction work in Brewarrina.

In Integrity Homes, the Appeal panel held as follows (our emphasis):

“45 Section 48O of the Home Building Act 1989 gives the Tribunal power to make an order for a person to pay money by way of damages. Section 43 of the CTTT Act gives the Tribunal in a renewed proceeding power to make any order that .it could have made when the matter was originally determined. The statutory provisions do not have any restriction such as that in the Brewarrina case.

46 This Brewarrina submission by the builder has no substance. The Brewarrina decision was an appeal from a decision which was not in relation home building. It was not about a home. It was not a claim to which the Home Building Act or section 43 of the CTTT Act could have applied. It was decided largely on interpretation of a sophisticated contract for a substantial commercial construction and the common law on building contracts and litigation about them. The submission ignored the special statutory provisions that apply to home building work dealt with previously by the CTTT, and now NCAT. Those submissions have no relevance to the decision of 3 August 2015.”

Since deciding Integrity Homes, the Appeal Panel confirmed the view that the Brewarrina case did not apply to home building matters in Blessed Sydney Constructions Pty Ltd v Vasudevan [2018] NSWCATAP 98 ( 26 April 2018). On the basis of the Appeal Panel’s decisions in Blessed Sydney Construction and Integrity Homes, the Owner would have no difficulty seeking damages for the cost of rectifying defects or completing incomplete work on residential properties, even if the Owner did not terminate the Building Contract or attempted to terminate it incorrectly.

The opinions expressed in this article are general advice only which may not apply to your particular circumstances. If you have questions regarding your own home building dispute, please contact Mark Wang at Lighthous Law Group on 9744 9236 for personalised advice.