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

21 February, 2020 Off By Peter Fazio
  1. In home building disputes, an issue can arise from time to time about whether the Homeowner is entitled to recover damages from the Builder for defective and incomplete work, if the building contract has not been properly terminated.
  1. There is an argument often raised on behalf of the Builder that, unless the contract has been terminated or has come to an end, the Homeowner is not entitled to claim damages for rectifying defects or the cost of completing incomplete work.

  1. 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.
  1. 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.”

  1. The decision in Brewarrina appears to suggest that before the building work has reached the stage of practical completion, the property owner would not be entitled to damages because the contract is still on foot and the property owner has not suffered a loss in respect of any defective or in complete work.
  1. Brewarrina is often relied upon by Builders defending a claim by the Homeowner for alleged defects or incomplete work.
  1. The case provides an attractive defence for the Builder in that it is only after the contract has reached practical completion or is terminated, would the Homeowner be in a position to seek damages.
  1. It is not hard to see that Brewarrina might have serious implications for Homeowners who may have assumed that the contract has come to an end because the Builder has failed to return to the work site to complete the building work. The Homeowner may not have read the contract closely, and may not have followed the procedure under the contract for termination.
  1. When facing such submissions from the Builder, the Homeowner should be mindful that Brewarrina has been distinguished, at least in the context of home building matters in NSW.
  1. 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 are not restricted by the considerations in Brewarrina.
  1. Brewarrina involved a commercial construction project, not residential dwelling building work. The Home Building Act 1989 did not apply to the construction work in Brewarrina.
  1. 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.”

  1. Since deciding Integrity Homes, the Appeal panel confirmed that Brewarrina did not apply to home building matters in a subsequent decision of Blessed Sydney Constructions Pty Ltd v Vasudevan [2018] NSWCATAP 98 ( 26 April 2018).
  1. On the basis of the Appeal Panel’s decision in Blessed Sydney Construction and Integrity Homes, it would seem that the Homeowner would have no difficulty seeking damages for the cost of rectifying defects or completing incomplete work, even if the Homeowner has not terminated or properly terminated the building contract.
  1. 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 Lighthouse Law Group for personalised advice.