In the Strata Plan 92450 v JKN Para 1 Pty Ltd & Anor [2022] decision, although the Supreme Court found that the ACP cladding did not comply with the deemed-to-satisfy provisions of the Building Code of Australia (BCA), it did not award damages, finding that there was no breach of the Home Building Act (HBA) statutory warranties. See our case summary here.

On appeal, the NSW Court of Appeal overturned the primary decision, finding that the primary judge erred in:

  • not finding a breach of section 18B(1)(c) of the HBA
  • placing the onus on the Owners Corporation to prove that an alternative solution was not and would never be available to rectify breaches of the BCA
  • not awarding damages.

Although the primary judge ultimately found no breach of section 18B(1)(c) of the HBA, upon the Court's 'strict' view of the section and facts, the builder was in breach. The Court also noted that during an oral argument, the builder had accepted that it was in breach of the statutory warranty (that the work will be done in accordance with, and will comply with, this or any other law) under section 18B(1)(c) of the HBA.

In the most significant part of the decision, the Court found that the primary judge erred in finding that the Owners Corporation had the onus of establishing that an alternative solution could not have been prepared at the relevant time or at the time of the proceedings. The Court found that the Owners Corporation had established that the builder and developer had not complied with the BCA, and that the evidentiary onus on the Owners Corporation did not extend to proving that there was no possible way for the builder and developer to comply with the BCA.

In relation to damages, the Court identified that the correct assessment of damages for building contracts is the reinstatement of an aggrieved party rather than the diminution in value of a defective building, taking into account that the reinstatement damages must be based on rectification work that is reasonable. The Court noted that the test of unreasonableness is satisfied by exceptional circumstances. On the facts, the builder and developer argued that any breach of the statutory warranties was purely formal. However, the Court found that the Owners Corporation was entitled to a building that complied with any deemed to satisfy provisions of the BCA as it was at the relevant time.

The decision will likely stand as authority on what is necessary to prove in a cladding claim and the extent of the evidentiary onus.

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