The NSW Civil and Administrative Tribunal (NCAT), unlike any other Court, can make costs orders and work orders. Contractors must behave professionally when carrying out construction works. Otherwise, Contractors may have costs ordered against them, rather than a work order to fix the defective works.
Principals should also be aware that NCAT will exercise its discretion when deciding whether to adopt expert recommendations on whether to apply a margin on top of costs orders for itemised defective works.
This article looks at a recent decision in which both these principles were applied.
In Patel v Southern Cross Joinery Pty Limited  NSWCATCD 162, Nandini Patel (Patel) contracted with Southern Cross Joinery Pty Limited (Southern Cross) for the supply and installation of cabinetry. Patel claimed that Southern Cross' building work was not reasonably fit for a specified purpose and in breach of statutory warranties under the Home Building Act 1989 (NSW) (the Act). Patel sought $27,000.00 to rectify five “major issues” in the building works performed by Southern Cross. Southern Cross indicated that it was willing to accept a work order being made against it if the need for rectification was established.
NCAT relied on the evidence presented by both parties, as well as evidence provided by an independent expert engaged by Patel. That expert prepared a Building Report that itemised the costs for the defective works and recommended a 25% margin on top of individual defective items.
NCAT found that Patel only proved three ‘small and discrete issues' requiring rectification (on the balance of probabilities).
Section 48MA of the Act provides that ‘a court or tribunal is to have regard to the principle that rectification of…defective work by the responsible party is the preferred outcome'. NCAT did not order Southern Cross to rectify the defects, as the evidence showed that there had been prior unsuccessful attempts by Southern Cross to rectify the defective works. During cross-examination, Patel also suggested that Southern Cross was “abusive”, leading NCAT to make a costs order instead of the ‘preferred outcome' of a work order. Ironically though, Southern Cross was ordered to pay just $378.95 to compensate Patel for the defective works.
Of interest though, the Building Report identified a margin of 25% for “overheads, supervision or co-ordination” for each of the items in the Building Report. The Building Report did not address whether the 25% margin was appropriate if the works requiring rectification were “relatively small and discrete issues”. NCAT decided not to apply the 25% margin on the items requiring rectification as the evidence suggested that the nature of the works did not require a “relevantly-skilled tradesperson…to incur costs of overheads, supervision or co-ordination”. NCAT held that the 25% margin was appropriate if they were wrong in their conclusion regarding the nature of the works.
Contractors should act professionally when carrying out defective works. Otherwise, NCAT may order costs orders rather than a work order, contrary to the ‘preferred outcome' in s 48MA of the Act.
This case also demonstrates that NCAT may not adopt the recommendations of experts regarding the application of a margin in construction disputes.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.