Clements v Murphy  NSWCATAP 152
In Clements v Murphy  NSWCATAP 152, the New South Wales Civil and Administrative Tribunal Appeal Panel (Appeal Panel) has provided further guidance on section 48MA of the Home Building Act 1989 (NSW) (the Act), as to whether it applies to incomplete work.
Section 48MA of the Act provides:
"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."
The Owners entered into a contract with the Builder to construct a home (Contract). When a dispute arose regarding payment claims lodged by the Builder, the Builder served a notice purporting to terminate the Contract, which the Owners accepted and treated as a repudiation of the Contract.
The Owners commenced then proceedings in the New South Wales Civil and Administrative Tribunal (Tribunal) seeking an order for the Builder to complete the works under the Contract or, in the alternative, for the Builder to pay the costs to complete the incomplete works under the Contract.
The Tribunal found the Owners had validly terminated the Contract and ordered the Builder to rectify 15 items of defective work and pay the Owners a sum of $45,054.79 for the incomplete works.
The Builder sought leave to appeal, submitting that the Tribunal had erred in:
- finding that section 48MA of the Act does not apply to incomplete works; and
- ordering the Builder to pay the Owners for the cost of the incomplete works, instead of ordering the Builder to complete the incomplete works.
The Builder submitted that:
- as to the wording of section 48MA, defective work can include incomplete work;
- section 48MA was not intended to limit the discretion of the Tribunal in resolving building claims; and
- under common law principles, it had a "right to rectify work which was defective or incomplete, and that section 48MA of the Act reflected that entitlement".
The Owners opposed the application for leave to appeal.
The Appeal Panel held that the Tribunal was correct in ordering the Builder to rectify the items of defective work and to pay the Owners for the incomplete works.
As to the submission that incomplete work was defective work, the Appeal Panel noted:
"There may be some room for debate in individual cases as to whether a particular matter complained of is incomplete or defective work. For example, a failure to install handles on kitchen cupboards may be argued to be incomplete work, but may also be characterised as defective work. However, in general terms, a failure to install major building elements such as windows or a roof would clearly constitute incomplete work and could not properly be characterised as defective work."
As to the common law right to rectify, the Appeal Panel held that it did not include a right to complete incomplete work after a contract has been terminated.
Whilst the Appeal Panel acknowledged that section 48MA was not intended to limit the power of the Tribunal with respect to making orders in building claims, it considered that this did not assist in considering whether "defective work" in section 48MA extended to work which is incomplete.
The Appeal Panel agreed with the Tribunal below in its finding that section 48MA is not intended to apply to work which is incomplete and which cannot be characterised as defective work. This leaves room open for the 'debate' in some instances as to proper characterisation, as referred to above.
The Appeal Panel concluded that where "a building contract has been terminated prior to completion of the work by reason of the builder's repudiation, it would be unusual for the Tribunal to direct the builder to return to complete the work. In our view, on its true construction, s 48MA does not require the Tribunal to consider that that should be the preferred outcome."
What does this mean?
Whilst section 48MA has changed the landscape for applicants in home building disputes, this decision is an important marker in terms of the limits of its application in circumstances where the contract has been terminated prior to completion.
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