Can the Builder Return to Fix Defects or Complete
| Yes is the short answer. In the NSW case of The Owners- Strata Plan No 76674 v Di Blasio Constructions Pty Ltd [2014] NSWSC 1067, the Supreme Court in NSW agreed that the Builder does have the initial right to return and fix defects if there is an opportunity to do so offered by the owner.
BUT if there is “an inadequate response” by the Builder then the Builder will lose the right to return and fix. |
| The Owners’ Corporation (“OC”) got a report of defects (“Report”) and gave it to the builder with the request the Builder fix the defects as set out in the scope of works provided in the Report. |
| The Court found that the owner who suffers a loss due to a breach of contract is required to act reasonably so as to recover the loss, and this includes making reasonable attempts to mitigate (reduce) the loss. |
| By the same token the plaintiff who has suffered the loss is entitled to recover the costs of reinstating the property so it corresponds to the contract. |
| And it is for the defendant – the Builder in this case – to prove the owner acted unreasonably and taking Court proceedings is one factor taken into account when deciding if the owners acted reasonably. |
| Making offers and trying to avoid litigation is an indicator of acting reasonably – for both Owners and Builder – in every case. |
| Making an offer is a matter of expertise as to the exact terms, and whether or not it qualifies as reasonable – the Builders offer was not reasonable. |
| Case Note – Can the Builder Return & Fix: |
| In a current matter a Builder client of ours was locked out on the basis that the Builder had exceeded the building period. Using the default provisions in the Contract the Owners’ lawyer sent the Builder a “Notice of Default” carefully worded to comply with the law. Completion was due on 17 September 2013 and the building works were not complete by 19 November 2015. The Builder claims it was waiting for decisions to be made by the Owners. The Owners claim the Builder asked for payment of Progress Claims before the payments were due to be paid. Subsequently the Owners’ lawyer served a Notice of Termination. Our argument is that the Notice of Termination is invalid and therefore is repudiation of the Contract by the Owners which would entitle the Builder to the money owing and damages for loss of profit. The cheapest option is a commercial settlement – if we can get one. |
| It would be cheapest for both parties if a compromise could be reached as to what amount, if any, is paid to the Builder and the Builder goes back and finishes the work – or some variant of that is able to be negotiated. |
| In our case the Builder was waiting for a decision by the Owners on what type of roof should be installed on a pergola but as the Builder had finished all other building works for a Lock-Up Stage payment claim – the Builder claimed the Lock-Up Stage payment. The Builder also claimed the Fixing Stage payment because that work (in the house) was completed too. |
| The case of Cardona & Anor v Brown & Anor [2012] VSCA 174, an Appeal case in the Victorian Supreme Court decided that a Builder can only ask for Progress Payments in the order fixed in the Contract. So if the Builder is waiting for the Owners to make a decision on the roof (tiles or colour bond) before putting on the roof the Builder cannot claim Lock-Up Stage payment or any part of it unless all the roof is on – even if the Builder has gone on with the building works and completed all work necessary to be able to claim Fixing Stage. The Builder has to finish Lock-Up Stage before being entitled to claim Fixing Stage. |
| The answer might be to have the parties sign a variation to the Progress Payment stages which will permit – by the variation – a reduced amount to be paid for a partial Lock-Up Stage and provides for some of that payment to be set aside until the owners make a decision. |
| Another option is for the Builder to suspend the building works and claim an extension of time until such time as the owners provide written instruction in respect to the type of roof selected. |
| Another option in Victoria is for the Builder to suspend the building works and claim an extension of time – as above but also put the owners on notice that if the decision is not made within (a reasonable time), for example, 14 days, an application can now be made to Domestic Building Dispute Resolution Victoria (DBDRV) (go to https://www.dbdrv.vic.gov.au/dispute-resolution-process) who will if the dispute is too complex issue a Certificate for the dispute to be referred to VCAT for an order directing a variation to the Progress Payment amount/s for the Lock-Up Stage and also provide for some of that Lock-Up Stage payment to be set aside until the owners make a decision. The type and variety of orders that can be sought will depend on each set of circumstances in each case. |
| Contact us at admin@hls.net.au if you need to make an application to DBDRV or draft a Variation or special conditions to allow variation of the Progress Payment Schedule.
This article provides information that is general in nature and is not a substitute for legal advice. |
