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People often get surprised when I tell them that they can't
automatically recover compensation from a builder just because that
builder has departed from the plans and specifications in the
building contract. They get even more surprised when I tell them
that departures from applicable Australian Standards and Building
Codes are still not enough to get you an award of compensation.
Even a failure by a builder to complete building works in a
"proper and workmanlike manner" (as the now repealed
Builders' Registration Act 1939 required) or in a
"proper and proficient" manner (as the new Building
Services (Complaint Resolution and Administration) Act 2011
now requires) or in a manner that is not "faulty or
unsatisfactory" (as both Acts require) will not necessarily
get you compensated.
So what does a consumer of building services have to prove in
order to be compensated for building services which are not of a
standard that they are entitled to expect, either under the
contract or the relevant building legislation or the Australian
Standards and Building Codes? The answer, in a word, is loss.
Broadly speaking, there are two classes of consumer protection
laws in both the old and the new building regimes in WA and they
each have a different purpose. One set of laws generally aims to
compensate people who have suffered a loss as a result of some
deficiency or defect in the services provided by builders under the
repealed legislation or by any member of a broader class of
building service providers under the current legislation. The other
set of laws aims to impose penalties on, or empower certain
government agencies to take disciplinary action against, builders
who breach the requirements imposed on them by law, even if there
are no resulting losses.
The old and new regimes may be different in terms of how
deficiencies or defects in workmanship are defined, the classes of
building service provider who may be held responsible for such
deficiencies or defects and the agencies that administer the law.
But this general distinction between laws that compensate consumers
and laws that punish builders still applies. And the laws that
compensate consumers generally only apply where a deficiency or
defect in building work has caused a loss.
Under the new building regime, there appears to be an increase
in the scope of losses that can be compensated. Whilst the scope of
the compensation provisions in the new law has not yet been
precisely defined by the courts, I expect that compensation will be
available at least for:
the cost of any remediation or restoration works required to
rectify the defects;
for defects which cannot be rectified in a cost-effective
manner, any diminution in the market value of a property adversely
affected by workmanship defects; and
credits for expenses saved by builders in performing the works
in a way which was cheaper than the amount it would have cost to
adhere to the plans and specifications.
The entitlement to credits for saved expenses warrants further
discussion. Where a builder saves money by cutting corners, the
finished product may be just as good as it would have been in the
event of strict adherence to the requirements of the contract.
Strictly speaking, then, it is inaccurate to speak of credits in
terms of compensation as there may not be anything to compensate
the consumer for where the builder has cut corners.
Rather, the right to a credit (or put differently, a discount
off the contract price) arises from the fact that the consumer did
not get what they paid for. Where the relevant building contract is
a lump sum contract, this may mean that the builder has not
"earned" any part of the lump sum contract price at all:
see Sumpter v Hedges [1898] 1 QB 673. In that event, it
may be that the builder is only entitled to be paid an amount
representing the "fair value" of the works actually
performed (which is generally assessed as the base cost of labour
and material supplied plus a 10% overhead and profit component: see
Sopov v Kane Constructions Pty Ltd (No. 2) [2009] VSCA
141).
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guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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