Australia: Residential Focus – 1 August 2018: Part 1 - Breach of statutory warranty

Champion Homes Sales Pty Ltd v Commissioner for Fair Trading [2018] NSWCATOD 114

The New South Wales Civil and Administrative Tribunal (Tribunal) recently considered in Champion Homes Sales Pty Ltd v Commissioner for Fair Trading [2018] NSWCATOD 114 whether the standard of liability for a breach of statutory warranties under the Home Building Act 1989 (NSW) (Act) should be different when the warranty is considered in light of a contractual provision or a disciplinary provision in the Act.

The case also considered whether a builder holding a contractor licence should be held to the same standard of liability under the Act when it subcontracts work to a licenced subcontractor as it is when it performs the work itself.

Facts

The builder carried out works at a property in Eastlakes and a property at Kyeemagh. It was alleged that the builder had breached its statutory warranties under section 18B(1)(a) of the Act (contractual provision) by failing to complete the works with due care and skill, and in accordance with the plans and specifications set out in the contract.

With respect to the Eastlakes property, it was alleged that there was water ingress caused by a failure of the waterproofing membrane under the sliding door, resulting in water damage. The builder had engaged a licenced waterproofer to complete these works.

With respect to the property at Kyeemagh it was alleged that there were leaks to the laundry ceiling and in the garage, as well as occurrences of water ingress. No subcontractor had been engaged to complete these works. Instead, a NSW Fair Trading officer found that the builder did not install the flashings to the roof correctly, and that the builder should have installed a metal cap over the parapet wall in the garage.

Based on the evidence provided by the NSW Fair Trading officer after inspections at both properties, the Commissioner for Fair Trading (the Commissioner) found that the builder had twice breached its statutory warranty to complete work with due care and skill under section 18B(1)(a) of the Act.

The Commissioner subsequently relied on sections 51(1)(c) and 56(c) of the Act (disciplinary provisions) in imposing a penalty of $3,000 against the builder. Section 51(1)(c) provides that a holder of a contractor licence authorised by that licence to do residential building work is guilty of improper conduct if it breaches a statutory warranty. Section 56(c) provides that the Commissioner may take disciplinary action under section 62 against the licence holder on the ground that the holder is guilty of improper conduct.

Administrative review

The builder commenced proceedings in the Tribunal for a review of the Commissioner's decision. Ultimately, the Tribunal upheld the decision.

The builder submitted that the breaches of statutory warranties should have varying standards of strict liabilities when considered either for the purposes of contractual provisions (for example, under section 18 of the Act) or as disciplinary provisions (for example, under section 51 of the Act). Specifically, the builder argued that it should not be held responsible failures in work done by subcontractors and the Act should not be interpreted so as to impose strict liability upon a builder for the work of others, when applying the disciplinary provisions.

The Tribunal found that no distinction between statutory warranties for the purposes of contractual provisions or disciplinary provisions should be drawn, and that the entire Act should be construed in a manner so as to give the same meaning to words which occur in different parts throughout the Act, unless there is good reason to do otherwise. The Tribunal therefore found it would be inappropriate to read down the words "breaches a statutory warranty" or give a different meaning to the word "breach" in different sections of the Act.

The Tribunal rejected the builder's arguments, finding that:

• while differing forms of protection for the public are offered under sections 18 and 51 of the Act, this does not mean that the words should be read differently between the sections. Accordingly, there should not be varied levels of standards of liability when addressing breaches of statutory warranties
• the Commissioner's interpretation of statutory warranties did not impose strict liability, as the defences set out in section 18F of the Act contemplated the degree of liability the builder should be subject to, especially in instances where the degree of fault of the builder is minimal. None of the defences applied in the current case.

The Tribunal ultimately held that the $3,000 fine imposed under section 62(3) of the Act for two breaches of statutory warranties was the correct and preferable decision.

What does this mean?

This decision clarifies that the same standard of liability exists for breaches of statutory warranties, notwithstanding the differentiation between the warranties being considered for the purpose of contractual provisions or disciplinary provisions. The Tribunal emphasised that it will construe the Act "as far as possible to give the same meaning to words which occur in different parts of the statute, unless there is good reason to do so otherwise."

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