Does 'termination' mean completion of works in Home Building Act warranty claims?
The recent decision in Howell v Talevski clarified that the issue of whether proceedings for breach of the warranties in section 18B of the Home Building Act 1989 (NSW) (HBA) have been commenced within time is ultimately a matter of contractual construction, and that termination of a contract does not render the works complete by relieving the builder of any further obligation to perform the works.
This case involves a claim by the plaintiff owner (Owner) against the defendant builder and structural engineer (Builder) regarding defective and incomplete work.
In 2007, the parties entered into two contracts. The first, in April 2007, was for the construction of foundations. The second, in May 2007, was for construction of a duplex on those foundations (Contract).
The Builder commenced work under the Contract in August 2007. The date for completion of the work was extended a number of times to a date after 17 July 2011. By August 2012, the works remained incomplete. The Contract was terminated in November 2012.
The Owner commenced proceedings on 17 July 2018 in NCAT alleging breach of the warranties in section 18B (Warranties) of the Home Building Act 1989 (NSW)(HBA). Those proceedings were subsequently transferred to the Supreme Court of NSW.
The Builder argued that the proceedings were commenced after the relevant limitation period had expired on the basis that on termination of the Contract, the works were 'complete', and so the limitation period commenced on the date of termination.
The preliminary issues for the Court to determine included:
- the length of the limitation period
- when the limitation period commenced, which involved consideration of when the work was completed.
Stevenson J concluded the plaintiff had commenced proceedings within time on the following basis.
The limitation period for breach of the Warranties is seven years for all defects where the relevant contract was entered into before 1 February 2012. The subsequent amendments to the limitation period (reducing this to six years for structural defects and two years for non-structural defects) were not retroactive.
According to section 18E(1) of the HBA (in force in 2007), the limitation period for filing proceedings runs from:
- "the completion of the work to which it relates, or
- if the work is not completed:
- the date for completion of the work specified or determined in accordance with the contract, or
- if there is no such date, the date of the contract."
In determining whether the provisions of section 18E(1)(a) or (b) applied, His Honour stated that "completion of residential building work" occurred on the date that the work was complete "within the meaning of the contract under which the work was done", and not any definition within the HBA.
His Honour then concluded that the work under the Contract was not complete immediately prior to its termination, based on the definition of completion in the Contract. His Honour also concluded that the termination and discharge of the Builder's contractual obligations did not render the works complete.
Accordingly, His Honour concluded that the limitation provisions in section 18E(1)(b) applied to the claim, with the limitation period running from the date for completion of the work "specified or determined" under the Contract.
The Court noted that the parties had agreed to extend the date for completion of the work to after 17 July 2011.
Accordingly, His Honour concluded that the proceedings were commenced within time as they were commenced within seven years of the date for completion.
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