Australia: Residential Focus - 18 January 2017

Last Updated: 22 January 2017
Article by Lauren Stables and Christine Jones

Xu v Jinhong Design & Constructions Pty Ltd [2011] NSWCA 277


The respondent, Jinhong Design & Constructions Pty Ltd (the Builder) and Ausino Art Ceramic Development Pty Ltd (the Owner) entered into a contract, to construct 18 townhouses, shops and offices at Sylvania Waters for $2.385 million (the First Building Contract). On behalf of the Owner, two of its directors signed a Deed of Guarantee and Indemnity contained within the First Building Contract. In the following weeks, one of those directors was removed and a replacement contract was executed (the Second Building Contract). The Deed of Guarantee was not signed. The Builder alleged that the then directors of the Owner (the Directors) promised to sign the form of guarantee at a later date.

During the construction work, numerous variations were agreed between the parties, however only one variation was agreed in writing. The Builder claimed the variations and an amount outstanding under the Second Building Contract.

The Court found in favour of the Builder. The Directors appealed to the New South Wales Court of Appeal.

Issues for determination

The issues for the Court of Appeal to determine included whether:

  1. the Directors promised for consideration to sign the guarantee in the Second Building Contract;
  2. the Directors represented that they would sign the guarantee in the Second Building Contract and whether those representations constituted misleading and deceptive conduct and knowingly false representations of fact; and
  3. if the Directors had signed the form of guarantee, they would have been liable to indemnify the Builder, inter alia, in respect of amounts owing pursuant to variations to the building work that were agreed between the Owner and the Builder, whether agreed orally or in writing.


The Court of Appeal found that the fact one of the Directors signed a guarantee in respect of the First Building Contract, did not conclude that he would have signed a guarantee in the Second Building Contract. Furthermore, the failure to fill in the names of the Directors as the guarantors suggested against the likelihood that the Builder 'insisted on personal guarantees being given as part of the replacement contract.'

The findings of the primary judge that the appellants made the alleged representations were vitiated for the same reasons as described above. The Court of Appeal held that the Directors did not have the requisite states of mind at the time they made the alleged statements to constitute misleading and deceptive conduct and therefore the claim failed.

The Court of Appeal held that the oral variations were not enforceable having regard to section 6(1)(b) of the Home Building Act 1989 (NSW), which provides that the requirement of writing imposed by section 7 also applies to variations.

The guarantee was limited to the payment of 'all monies agreed to be paid by the owner under this contract.' As clause 17.1 of the Second Building Contract required variations to be in writing, any monies recoverable by the Builder by reason of the oral variations could not be characterised as 'moneys agreed to be paid by the owner under the contract.' Accordingly, the Court of Appeal held that the guarantees, if given, would not permit recovery of the variations against the Directors.

The Court of Appeal has remitted the Builder's contract claim to the Supreme Court.

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Australian Bureau of Statistics

09/01/2017 Building Approvals, Australia, Nov 2016 (cat no. 8731.0)

Practice and courts

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Steven Mace v Christopher John McPherson t/as CMC Building Works [2017] NSWCATAP 8

Having regard to the considerable costs which have clearly been expended in relation to the Item 2 claim, we consider that the parties should have the opportunity to make submissions as to orders which ought be made as to costs.

Commissioner for Fair Trading v Younan [2016] NSWCATAP 270

APPEAL – Civil and Administrative Tribunal – administrative review – disciplinary action under Home Building Act – operation of transitional provisions concerning statutory amendments – sufficiency of rectification order – statutory construction – question of law.

Johnson v Lukeman [2016] NSWCATAP 272

APPEAL – Civil and Administrative Tribunal (NSW) – procedural fairness - refusal to adjourn proceedings –adequacy of preparation time – adequacy of reasons APPEAL – Civil and Administrative Tribunal (NSW) – expert evidence – adequacy of reasons – whether report provided no evidence or unreasonable to rely upon APPEAL – Civil and Administrative Tribunal (NSW) – s 48MA of the Home Building Act – relevant consideration.

Access Housing Pty Ltd ACN 065902936 v Rayfield [2017] NSWCATAP 4

CIVIL AND ADMINISTRATIVE TRIBUNAL – Appeal Panel – home building – consumer claim – breach of statutory warranty – defective work – compensation based on demolition of building works – denial of procedural fairness – misapplication of Belgrove v Eldridge – refusing to receive evidence of director of the appellant as expert evidence – no error of law.

Leisure Brothers Pty Ltd v Smith [2017] NSWCATAP 11

Procedure- Failure to comply with directions, refusal to adjourn hearing. Evidence- Sufficiency of evidence where no competing evidence, lump sum quotation prepared by reference to detailed scope of work. Leave to appeal- new evidence not reasonably available at the time of the hearing.

Economos v P & T Athos Constructions Pty Ltd [2016] NSWCATCD 89

Defective work.

In the matter of Datlas-Rahme Construction Pty Ltd [2016] NSWSC 1833

CORPORATIONS — Winding up — Application to set aside creditor's statutory demand under s 459H of the Corporations Act 2001 (Cth) – where plaintiff contracted with defendant for the defendant to perform painting works on a third party's property – where plaintiff contended defendant caused damage to third party's property – where plaintiff contended that costs of remedying defects caused by defendant constituted offsetting claim – whether there was contract between plaintiff and third party under which plaintiff may be contractually liable to rectify damage caused by defendant – whether offsetting claim under s 459H of the Corporations Act 2001 (Cth) established.

Krahe v Manfate Pty Ltd [2016] NSWCA 363

BUILDING AND CONSTRUCTION – contracts – oral contract – whether statement of a price was an estimate or a fixed quote – evidence of past dealings between parties suggestive of informal, trusting and flexible contractual relationships. APPEAL – whether primary judge erred in admitting evidence of prior dealings between the parties – whether primary judge erred in his assessment of the credibility of the appellants' evidence and the interpretation of their affidavit evidence – whether primary judge erred in his assessment of the evidence giving rise to the contract which led to a conclusion adverse to the appellants.

Karan v Champion Homes Sales Pty Ltd [2016] NSWCATCD 84

Home Building---Limitation of Actions---Statutory Warranties---Date of Practical Completion.

This publication does not deal with every important topic or change in law and is not intended to be relied upon as a substitute for legal or other advice that may be relevant to the reader's specific circumstances. If you have found this publication of interest and would like to know more or wish to obtain legal advice relevant to your circumstances please contact one of the named individuals listed.

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Lauren Stables
Christine Jones
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